MBS are created when an entity acquires a bundle of mortgages and then sells the securities. Most MBS are seen as a “pass-through” security where the principal and interest payments are passed through the issuer to the investor.
Most funds typically trade securities taken from the three prominent agencies – Ginnie Mae, Fannie Mae and Freddie Mac. These agency securities usually come with high-quality ratings and are explicitly or somewhat implicitly backed by the U.S. government.
LDSF’s “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,” according to First Trust.
The new ETF charges 0.86 per year, or $86 on a $10,000 investment.
For more new ETF launches, visit our New ETFs category.