FT Portfolios has launched the First Trust Short Duration High Yield Bond ETF, which will primarily invest in below investment grade debt securities as rated by Moody’s Investor Services and Standard & Poors.
Securities may also be unrated but considered to be of comparable credit quality to other below investment grade securities. The First Trust ETF may also invest opportunistically in senior floating rate loans, investment grade debt securities and convertible bonds.
The fund’s aggregate exposure to senior floating rate loans will be limited to 40 per cent of its NAV. The weighted average effective duration of the First Trust ETF’s portfolio securities may not exceed three years.
“Given the historically low interest rates in the present fixed-income market, investors have few options for earning attractive rates of return without incurring significant interest rate risk,” says William Housey, senior vice president and senior portfolio manager for the leveraged finance investment team of First Trust Advisors. “By investing in high-yield bonds and other fixed income asset classes that exhibit a low correlation with traditional fixed income investments, our ETF may improve both diversification and risk-adjusted returns within diversified fixed-income portfolios. Through our rigorous, repeatable and meticulous bottom-up credit evaluation process, Canadian investors may be able to capitalise on the best high-yield opportunities from strong issuers in a variety of sectors.”
“With a firming US economy, improving corporate fundamentals and the end of the Fed’s bond purchase program drawing near, we expect higher interest rates in the future,” says Fraser Howell, CEO of FT Portfolios Canada Co. “The First Trust Short Duration High Yield ETF aims to enable investors to lower their portfolio duration and maintain an attractive yield.”