Today First Trust Advisors L.P. announced that it launched a new exchange-traded fund that will appeal to fixed-income investors concerned with the prospect of a rising-rate environment.
The First Trust SSI Strategic Convertible Securities ETF (NASDAQ: FCVT) will trade on the NASDAQ with the ticker FCVT. It will be the first actively managed convertible securities ETF listed in the U.S. It will look to deliver total return by investing in a diversified portfolio of securities that are inside and outside of the U.S.
Convertible securities are a sort of hybrid between fixed-income and equities that provide current income but also have the ability to capture capital appreciation through conversions. In this way they offer some of the upside of the equity markets but mitigate the downside.
First Trust sees the shifting economic climate as an opportunity for convertible securities to offer investors a solid total return investment options while staying active in equity returns, current income, and also protecting their principal.
According to the prospectus, convertible securities have historically outperformed in rising rate environments.