First Trust portfolios, the Il-based sixth-largest issuer of exchange-traded funds, launched a new actively-managed product that aims to generate risk-adjusted returns through positions in various asset classes.
The newly launched First Trust Strategic Income ETF (FDIV) is sub-advised by six portfolio managers including Stonebridge, Richard Bernstein, Energy Income Partners and First Trust Global Portfolios.
FDIV is a “multi-strategy” fund that holds securities across six-asset classes; high-yield bonds and senior loans, master limited partnerships (MLPs) and energy infrastructure stocks, preferred securities, dividend stocks, mortgage-related securities and international sovereign bonds.
The fund seeks to achieve its investment objectives through specialized management teams that target exposure to the respective asset class they control by using tactical asset allocation strategies in multiple investment categories.
The fund primarily will not invest more than 30 percent of its portfolio in each of the six asset classes. However, depending upon circumstances, holding in a single-asset class may go up to 50 percent. As of Sep. 12, the fund had its biggest exposure in dividend paying equities (26.75 percent), MLPs (20.33 percent), followed by MLPs (20.33 percent) and high yield bonds & senior loans (15.52 percent). Geographically, North American firms account nearly 80 percent of allocation, followed by Europe and Latin America.
The new ETF is a fund of funds and should appeal to investors who are seeking both capital appreciation and elevated risk-adjusted returns through diversified exposure in multiple asset classes.
The actively-managed fund quickly readjusts asset allocations based on global macro economic conditions and provides an alternative to traditional fixed-income funds. The diversified fund reduces overall portfolio volatility while potentially offering high levels of current income and long-term capital appreciation.
The fund is likely to face competition from FT’s own passively-managed peers, the First Trust Multi-Asset Diversified Income Fund (MDIV) and the First Trust International Multi-Asset Diversified Income Fund (YDIV).
FDIV has an annual expense ratio of 0.87 percent.
Disclosure: No holdings