In 2018, US-listed fixed income ETFs added a combined $97 billion in new assets, accounting for about 31% of all ETF inflows last year. To meet this demand for fixed-income products, First Trust announced today that it launched a new actively managed exchange-traded fund (ETF), the First Trust Long Duration Opportunities ETF (NYSEArca: LGOV).
LGOV seeks to generate current income with a focus on preservation of capital by investing at least 80% of its net assets, including investment borrowings, in investment grade fixed-income securities that are issued or guaranteed by the U.S. government. With heightened interest rate and equity market volatility, the portfolio managers believe mortgage-backed securities (MBS) are an important piece of a diversified portfolio due to their low correlation to other core asset classes and positive credit quality trends.
LGOV’s portfolio is managed using a disciplined, rigorous and repeatable combination of top-down macro-economic views coupled with bottom-up security selection. The fund is managed by First Trust Advisors L.P., with day-to-day management decisions made by the First Trust Securitized Products Group portfolio managers.
The First Trust Securitized Products Group is a team of experienced professionals with extensive experience in managing and developing trading strategies for mortgage and real estate investment portfolios. When selecting the portfolio for the fund, the portfolio management team focuses on the global economy, macro trends in the fixed income market as well as ongoing valuations and trends of core MBS sectors.
The portfolio managers believe thorough and continuous monitoring of overall housing market fundamentals, quantitative portfolio modeling, and the ability to rebalance the portfolio to stay within the fund’s duration target of eight or more years, is critical to achieving higher risk-adjusted returns. 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.
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“This ETF will further expand First Trust’s robust lineup of actively-managed ETFs, providing investment advisors with a long duration strategy that complements our existing lineup of actively-managed fixed income ETFs,” said Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust.
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