First Trust Advisors has launched a new actively-managed exchange traded fund, the First Trust Low Duration Strategic Focus ETF.
The fund seeks to generate current income, with a secondary objective of preservation of capital by allocating primarily among First Trust ETFs, but may also include other ETFs representing various asset classes, aimed at providing diversification benefits and less interest rate sensitivity when compared to traditional core fixed income benchmarks over time.
The fund is managed by First Trust Advisors, with selection and portfolio decisions made by an Investment Committee, using an investment process that combines bottom-up fundamental credit analysis with disciplined portfolio construction. The process begins with a robust, top-down review of macroeconomic factors including monetary and fiscal policies, growth forecasts, trade and tax policies, global market views and current market valuations. The process combines these factors with disciplined bottom-up asset level analysis including views on rates, duration, credit, currency and current asset valuations.
The relative attractiveness of the various fixed income asset classes is also evaluated in an attempt to best position the fund to take advantage of market trends and investment opportunities. The Investment Committee seeks to construct a portfolio with a target duration of three years or less, while managing both interest rate risk and credit risk. Duration is a mathematical calculation of the average life of a debt security (or a portfolio of debt securities) that serves as a measure of its price risk. The fund focuses on lower duration securities as they have historically held up better in rising interest rate environments than those with longer durations. “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,” said Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust.
The First Trust Advisors Investment Committee manages the portfolio by leveraging the knowledge of First Trust’s research teams and portfolio management teams who understand the unique factors that drive risk adjusted returns within various asset classes. They believe a successful investment process involves a disciplined and theory-driven framework to guide the building blocks of the portfolio’s allocation.