First Trust RBA Deglobalization ETF (DGLO)

DGLO is betting on a simple story: factories move closer to home. For three decades, companies have chased the cheapest labor worldwide, shipping goods across oceans, designing products in one country and making them in another. DGLO holds stocks of companies positioned to profit if that pattern reverses or stalls.

The fund is run by First Trust Advisors in partnership with an index provider, who screen for companies involved in reshoring (bringing manufacturing back to the United States or Europe), nearshoring (moving production to nearby countries instead of Asia), or supporting localized supply chains. This captures factory-automation makers, companies supplying domestic manufacturers, defense contractors, and infrastructure firms — anything benefiting if trade barriers rise, labor costs offshore stop being attractive, or governments decide certain industries must stay close.

It sounds sensible on its surface. Supply chains broke during the pandemic. Geopolitics is pushing governments to care about where things are made. Labor costs in China have risen. On paper, the bet makes sense. But thematic funds have a track record of underdelivering because they rise on headlines, not fundamentals. A fund called “Deglobalization” rides the news cycle, then declines when the story cools or reality disappoints. Most of the time, the broad market’s steady diversification beats a concentrated bet on one narrative.

The holdings are pulled from multiple sectors without an obvious glue except the deglobalization angle. A fund might own an automation-equipment maker, a steel company, a defense contractor, and a regional logistics firm. The companies do not move together. If trade stays open, the bets fail. If wages stay cheap overseas, the bets fail. If the fund has to own 50 companies to get enough exposure, concentration risk shrinks but the conviction weakens.

DGLO’s expense ratio is higher than a vanilla index fund tracking the S&P 500, which matters because you are paying extra for a bet that is not guaranteed. The underlying companies have no reason to outperform simply because they align with a theme. If the broad market rallies, the “deglobalization” angle may not matter. If the market contracts, concentrated thematic funds often fall harder.

There is also hidden currency exposure. Some holdings may be overseas companies or foreign manufacturers benefiting from nearshoring to their countries. Those positions carry exchange-rate risk on top of the equity risk.

Who actually holds this? Investors with genuine conviction that reshoring is not a fad but a lasting structural shift — a small group. Tactical traders betting the theme will pop in the next 12 months. Some advisors use it as a tiny sleeve (2–5 percent of a portfolio) to hedge clients concentrated in companies that depend on cheap global supply chains. Most disciplined, long-term investors avoid it and prefer broad diversification.

If you are considering DGLO, start by understanding the index methodology in the prospectus. Which companies qualify? Why? Look at the actual holdings and sector breakdown. Compare the expense ratio to both broad market funds (the baseline) and other thematic funds (the true comparison). Pull up a multi-year performance chart and ask: does the outperformance look like skill, or did the fund just happen to own the market’s winners during a rally? Finally, write down your investment thesis in one sentence. If you cannot, or if that sentence sounds like a newspaper headline rather than a durable business logic, the fund is probably momentum, not conviction. And momentum funds are for traders, not long-term investors.