WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. (“First Trust”) announced today that it has launched a new actively managed exchange-traded fund (“ETF”), the First Trust Low Duration Strategic Focus ETF (Nasdaq: LDSF) (the “fund”). The fund seeks to generate current income, with a secondary objective of preservation of capital. The fund seeks to achieve these objectives by allocating primarily among First Trust ETFs, but may also include other ETFs representing various asset classes, aimed at providing diversification benefits and less interest rate sensitivity when compared to traditional core fixed income benchmarks over time.
The fund is managed by First Trust Advisors L.P., with selection and portfolio decisions made by an Investment Committee, using an investment process that combines bottom-up fundamental credit analysis with disciplined portfolio construction. The process begins with a robust, top-down review of macroeconomic factors including monetary and fiscal policies, growth forecasts, trade and tax policies, global market views and current market valuations. The process combines these factors with disciplined bottom-up asset level analysis including views on rates, duration, credit, currency and current asset valuations. The relative attractiveness of the various fixed income asset classes is also evaluated in an attempt to best position the fund to take advantage of market trends and investment opportunities. The Investment Committee seeks to construct a portfolio with a target duration of three years or less, while managing both interest rate risk and credit risk. Duration is a mathematical calculation of the average life of a debt security (or a portfolio of debt securities) that serves as a measure of its price risk. The fund focuses on lower duration securities as they have historically held up better in rising interest rate environments than those with longer durations. “At this point in the cycle, we believe risk management is critical for fixed income investors. This ETF harnesses the best of First Trust’s intellectual capital to provide investment advisors with an efficient tool to help manage their clients’ fixed income needs,” said Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust.
The First Trust Advisors Investment Committee manages the portfolio by leveraging the knowledge of First Trust’s research teams and portfolio management teams who understand the unique factors that drive risk adjusted returns within various asset classes. They believe a successful investment process involves a disciplined and theory-driven framework to guide the building blocks of the portfolio’s allocation.
For more information about First Trust, please contact Ryan Issakainen at (630) 765-8689 or RIssakainen@FTAdvisors.com.
About First Trust
First Trust is a federally registered investment advisor and serves as the fund’s investment advisor. First Trust and its affiliate First Trust Portfolios L.P. (“FTP”), a FINRA registered broker-dealer, are privately held companies that provide a variety of investment services. First Trust has collective assets under management or supervision of approximately $124 billion as of November 30, 2018 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts. First Trust is the supervisor of the First Trust unit investment trusts, while FTP is the sponsor. FTP is also a distributor of mutual fund shares and exchange-traded fund creation units. First Trust and FTP are based in Wheaton, Illinois. For more information, visit http://www.ftportfolios.com.
You should consider the fund’s investment objectives, risks, and charges and expenses carefully before investing. Contact First Trust Portfolios L.P. at 1-800-621-1675 or visit www.ftportfolios.com to obtain a prospectus or summary prospectus which contains this and other information about the fund. The prospectus or summary prospectus should be read carefully before investing.
ETF Characteristics
The fund lists and principally trades its shares on The Nasdaq Stock Exchange, LLC.
Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Investors who sell fund shares may receive less than the share’s net asset value. Shares may be sold throughout the day on the exchange through any brokerage account. However, unlike mutual funds, shares may only be redeemed directly from the fund by authorized participants, in very large creation/redemption units. If the fund’s authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a discount to the fund’s net asset value and possibly face delisting.
Risk Considerations
The fund’s shares will change in value, and you could lose money by investing in the fund. One of the principal risks of investing in the fund is market risk. Market risk is the risk that a particular security owned by the fund, fund shares or securities in general may fall in value. There can be no assurance that the fund’s investment objective will be achieved.
An investment in a fund containing securities of non-U.S. issuers is subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers. These risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries.
The fund’s NAV is determined on the basis of U.S. dollars, if the fund invests in non-U.S. securities, you may lose money if the local currency of a non-U.S. market depreciates against the U.S. dollar.
The fund may be composed of a very small number of ETFs, which involves additional risk, including limited diversification.
Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt instruments in a company’s capital structure, in terms of priority to corporate income, and therefore will be subject to greater credit risk than those debt instruments.
Certain securities held by the fund are subject to credit risk, call risk, income risk, inflation risk, interest rate risk, prepayment risk and extension risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and that the value of a security may decline as a result. Credit risk is heightened for floating-rate loans and high-yield securities, because companies that issue loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy. Call risk is the risk that if an issuer calls higher-yielding debt instruments held by the fund, performance could be adversely impacted. Income risk is the risk that income from the fund’s fixed-income investments could decline during periods of falling interest rates. Inflation risk is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. Interest rate risk is the risk that the value of the fixed-income securities in the fund will decline because of rising market interest rates. Prepayment risk is the risk that during periods of falling interest rates, an issuer may exercise its right to pay principal on an obligation earlier than expected. This may result in a decline in a fund’s income. Extension risk is the risk that the average life of a security may extend if the rate of prepayments decreases, which increases interest rate exposure.
Convertible securities have characteristics of both equity and debt securities and, as a result, are exposed to certain additional risks.
Mortgage-related securities, including mortgage-backed securities, are more susceptible to adverse economic, political or regulatory events that affect the value of real estate. Mortgage- related securities are subject to the risk that the rate of mortgage prepayments decreases, which extends the average life of a security and increases the interest rate exposure.
Income from municipal bonds held by the fund could be declared taxable because of, among other things, unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer.
Investments in sovereign bonds involve special risks because the governmental authority that controls the repayment of the debt may be unwilling or unable to repay the principal and/or interest when due.
Senior floating rate loans are usually rated below investment grade but may also be unrated. As a result, the risks associated with these loans are similar to the risks of high yield fixed income instruments. High yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, may be highly speculative. The market for high yield securities is smaller and less liquid than that for investment grade securities.
Illiquid securities involve the risk that the securities will not be able to be sold at the time desired by a fund or at prices approximately the value at which a fund is carrying the securities on its books.
Covenant-lite loans contain fewer maintenance covenants, or no maintenance covenants at all, then traditional loans and may not include terms that allow the lender to monitor the financial performance of the borrower and declare a default if certain criteria are breached.
Securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government.
The fund currently has fewer assets than larger, more established funds, and like other relatively new funds, large inflows and outflows may impact the fund’s market exposure for limited periods of time.
The fund may invest in the shares of other investment companies, which involves additional expenses that would not be present in a direct investment in the underlying funds. In addition, the fund’s investment performance and risks may be related to the investment performance and risks of the underlying funds.
The fund is classified as “non-diversified” and may invest a relatively high percentage of their assets in a limited number of issuers. As a result, the fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers.
Actively managed funds are subject to management risk because the advisor or sub-advisor will apply investment techniques and risk analyses that may not have the desired result.
First Trust Advisors L.P. is the adviser to the fund. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund’s distributor.
