First Trust, one of the largest issuers of smart beta exchange traded funds, on Tuesday added to its lineup of fixed income ETFs with the debut of the First Trust TCW Unconstrained Plus Bond ETF (NYSEARCA: UCON).
The new ETF is actively managed, sub-advised and managed by TCW Investment Management Company. UCON’s “managers look for value across a range of global fixed income market segments seeking to maximize long-term total return,” according to a statement from Illinois-based First Trust.
The unconstrained investment style does not require a manager to adhere to a specific benchmark. Instead, unconstrained strategies allow a manager to focus on returns across many asset classes and sectors and the styles typically have a more long-term horizon. TCW can invest in bonds of any credit quality.
Understanding UCON’s Methodology
“TCW’s fixed income management philosophy applies a long-term value discipline emphasizing fundamental bottom-up research, which seeks to identify securities that are undervalued and offer a superior risk/return profile,” according to the statement.
UCON, which debuted with 31 holdings, currently allocates a significant portion of its lineup to short-term Treasuries. Due to the unconstrained nature of the new ETF, UCON’s managers have the flexibility to hold up to 70% of the fund in junk-rated debt, up to 60% in emerging markets bonds and up to 50% in bonds denominated in foreign currencies.
“In addition to Stephen Kane, the fund’s portfolio management team from TCW includes Tad Rivelle, Chief Investment Officer, Co-Director – Fixed Income, Portfolio Manager; Laird Landmann, Co-Director – Fixed Income, Portfolio Manager; and Bryan T. Whalen, CFA, Group Managing Director, Portfolio Manager,” according to the statement.
UCON is the seventh ETF in First Trust’s lineup of actively managed taxable fixed income ETFs. The new ETF charges 0.75% per year, or $75 on a $10,000 investment.
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