First Trust Advisors has launched the International Multi-Asset Diversified Income Index Fund (YDIV), an exchange-traded fund which is expected to begin trading on Nasdaq on 23 August 2013.
The International Multi-Asset Diversified Income Index Fund seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of the Nasdaq International Multi-Asset Diversified Income Index.
The fund provides international exposure to a diversified mix of asset classes in a single investment portfolio that has built-in volatility screens. Yield is the main driver behind the index; however, within each asset class a maximum volatility cap is used that seeks to limit securities that have high yields strictly due to poor price performance. The portfolio is further diversified within each asset class. As a result, the fund provides the potential for a lower-risk total return alternative to investing solely in one asset class. Since income is generated from multiple sources, the fund may provide less interest-rate sensitivity than traditional fixed-income securities.
The index is comprised of international dividend-paying stocks, international real estate investment trusts (REITs), non-US infrastructure companies, non-US preferred securities and an ETF that invests in non-US debt instruments. Every asset class has its own set of eligibility criteria, and every security in the index is non-US-listed and meets stringent eligibility criteria based on liquidity, size, volatility and yield. The index is rebalanced in every quarter.
“The fund will seek to deliver a relatively high level of income for investors, while also providing diversification benefits to traditional fixed income portfolios,” says Ryan Issakainen, senior vice president and ETF strategist at First Trust. “This diversified approach, with built-in rebalancing, may also help income-seeking investors maintain discipline during periods of volatility.”
