First Trust Advisors expanded on its ETF suite with an actively managed low-duration fixed-income strategy that could provide less rate sensitivity during the rising interest rate environment ahead.
The recently launched First Trust Low Duration Strategic Focus ETF (NasdaqGM: LDSF) comes with a 0.86% expense ratio.
The actively managed ETF will be managed by Daniel J. Lindquist, Managing Director of First Trust; David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing Director of First Trust; Chris A. Peterson, Senior Vice President of First Trust; William Housey, Senior Vice President of First Trust; and Steve Collins, Vice President of First Trust.
The First Trust Low Duration Strategic Focus ETF will try to generate current income and preserve capital through investing in a portfolio of U.S.-listed ETFs that track income-generating securities with a target duration of three years or less.
The ETF managers will utilize a disciplined process to review macroeconomic outlook, policy drivers and asset level analysis in the portfolio construction and ongoing risk management, according to the fund’s prospectus. They will take a top-down review of macroeconomic factors including monetary and fiscal policies, growth forecasts, trade and tax policies, global market vies and current market valuations.
he managers will then combine these factors with a bottom-up asset level analysis including views on rates, duration, credit, currency and current asset valuations. First Trust utilizes this process to evaluate the relative attractiveness of the various fixed income asset classes in an attempt to best position the Fund to take advantage of market trends and investment opportunities.
The ETF will focus on lower duration securities since these securities have historically held up better in rising interest rate environments.
“At this point in the cycle, we believe risk management is critical for fixed income investors. This ETF harnesses the best of First Trust’s intellectual capital to provide investment advisors with an efficient tool to help manage their clients’ fixed income needs,” Ryan Issakainen, Senior Vice President, ETF Strategist at First Trust, said in a note.
The Fund may invest up to 40% of assets in ETFs that have exposure to U.S. corporate high yield securities and senior loans. The fund may invest 20% assets in bonds issued by non-U.S. government and corporate issuers, including 10% of assets in ETFs holding emerging market debt. It may invest up to 10% of assets in ETFs holding preferred securities and up to 10% of assets in ETFs holding convertible securities.
For more information on new fund products, visit our new ETFs category.