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First Trust launches First Trust Institutional Preferred Securities and Income ETF

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First Trust Advisors has launched a new actively managed ETF, the First Trust Institutional Preferred Securities and Income ETF (FPEI).

The fund seeks total return and current income by investing at least 80 per cent of its assets in institutional preferred securities and income-producing debt securities. The fund is sub-advised by Stonebridge Advisors LLC (Stonebridge).
 
Stonebridge seeks an attractive total return by investing in high quality preferred securities.
 
“The new fund, FPEI, will be a pure play on the institutional preferred securities market, which is not easily accessible to retail investors and that we believe offers great value in the current market environment from both an income and relative value standpoint,” says Robert Wolf, Senior Vice President, Senior Portfolio Manager at Stonebridge. Institutional preferred securities provide a larger investable universe over traditional retail preferreds, as the majority of new issuance is currently in institutional preferred securities both in the US and globally. “Stonebridge is excited to be collaborating with First Trust on another actively managed preferred securities ETF after the success of the first actively managed preferred securities ETF, the First Trust Preferred Securities and Income ETF (NYSE Arca: FPE).”
 
“We believe this ETF will be an effective tool for investment advisors seeking to generate income for their clients, while helping to enhance portfolio diversification through the use of institutional preferred securities, which are absent from many preferred securities ETFs,” says Ryan Issakainen, CFA, Senior Vice President, Exchange-Traded Fund Strategist at First Trust. “Currently, the majority of institutional preferred securities have variable rate coupons, which we believe have the potential to hold up better than preferreds with fixed rate coupons in a rising interest rate environment.” Variable rate, or fixed-to-floating rate securities, initially have a fixed rate of income for a set period and then reset to a floating rate of income, typically at the first call date if they are not redeemed. The rate of income in fixed-to-floating rate securities may reset as rates move higher or lower, making them less sensitive to interest rate changes.
 
In addition to Robert Wolf, the fund’s portfolio management team from Stonebridge includes Scott Fleming, President and Chief Investment Officer, and Danielle Salters, CFA, Vice President, Portfolio Manager and Credit Analyst. The portfolio managers are jointly responsible for the day-to-day management of the fund.
 

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