First Trust Global Portfolios Limited (FTGP), a global fund promoter, has launched a new actively managed open-end UCITS fund, the First Trust Tactical High Yield UCITS Fund, managed by its affiliate First Trust Advisors (FTA).
The First Trust Tactical High Yield UCITS Fund seeks to provide current income by investing primarily in high yield debt securities. Its secondary objective is to generate capital appreciation. The Fund may supplement its primary investment strategy with investments in investment grade corporate securities, government securities or exchange-traded funds in order to manage overall credit and duration risk. The fund’s investment approach includes a long/short strategy that allows the Fund to take both long and short positions synthetically through the use of financial derivative instruments for hedging and investment purposes, providing the opportunity to profit from both rising and falling price trends.
Without the long-only constraints of traditional fixed income strategies, the fund seeks to deliver attractive risk-adjusted returns through strong and weak markets. The portfolio may benefit from securities that the portfolio management team believes will underperform the high yield debt securities market. Additionally, the portfolio management team believes that shorting US Treasury securities can provide a natural risk control mechanism and has the potential to reduce portfolio volatility attributable to rising interest rates.
“At a time when investors are growing concerned about increasing interest rates on their fixed income portfolios and idiosyncratic challenges within credit markets, FTA is offering investors a way to potentially capitalise on the opportunities created by such fear-induced volatility,” says William Housey, CFA, Senior Vice President and Senior Portfolio Manager at FTA, who serves as the Fund’s Senior Portfolio Manager. “By combining a rigorous credit selection process with this Fund’s long/short strategy, FTA’s experienced leveraged finance investment team believes it can help investors achieve higher risk-adjusted returns in many different market conditions.”
“The historically low interest rates in today’s market present challenges for investors seeking income, but we believe this Fund offers a long-term solution within a risk-managed framework for high yield investors,” says Housey. “Active credit selection and portfolio management coupled with alternative investment strategies, particularly this Fund’s approach to reducing interest-rate risk by adding senior loans and a short Treasury position, may help investors obtain enhanced returns from fixed-income investments in the wake of increasing interest rates.”
