Daily ETF Watch: Active Muni ETF Coming

Daily ETF Watch: Active Muni ETF Coming

First Trust is betting that investors will like its latest tax-exempt income ETF.

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Reviewed by: Hung Tran
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Edited by: Hung Tran

First Trust is betting that investors will like its latest tax-exempt income ETF.

 

First Trust Advisors plans on May 15 to launch the First Trust Managed Municipal ETF (FMB), an actively managed fund that will target investment-grade muni bonds. Muni debt is an asset class that offers investors access to improved finances of towns, cities and states as well as attractive taxable equivalent yields relative to other fixed-income securities, First Trust said in a press release.

The fund will launch at a time of rising interest rates, and as investors are looking for income. Equity markets continue trading sideways on mixed economic data in the U.S., weak economic data in China and escalating tensions in the Ukraine.

First Trust said that given the potential for rising interest rates as a result of stronger economic growth, it believes that positioning the fund along the intermediate portion of the yield curve, coupled with including bonds with lower investment-grade ratings, provides investors less interest-rate sensitivity than longer-duration portfolios.

FMB will have an expense ratio of 0.65 percent, or $65 for every $10,000 invested, according to the firm’s website.

Filing

In addition to the FMB launch, First Trust has also put into registration the First Trust Dorsey Wright International Focus 5 ETF, a proposed international version of its recently launched First Trust Dorsey Wright Focus 5 ETF (FV). Like FV, the new ETF will be a fund of funds that owns other First Trust ETFs.

Also like FV—which has $182 million in assets since launching last month—the new offering is a play on the current smart-beta trend in the ETF space that looks to slice and dice broad market securities into value, momentum and price groupings, among others.

In this case, the index provider, Dorsey, Wright & Associates, uses its relative strength methodology to measure the price performance of a security relative to a market average, another security or universe of securities.

Like its predecessor FV, the proposed ETF will invest in the following First Trust ETFs within the index, including:

1. First Trust Canada AlphaDex Fund (FCAN | D-43)

2. First Trust Germany AlphaDex Fund (FGM | D-43)

3. First Trust Switzerland AlphaDex Fund (FSZ | D-27)

4. First Trust United Kingdom AlphaDex Fund (FKU | D-47)

5. First Trust Emerging Markets Small Cap AlphaDex Fund (FEMS | D-48)

The new fund’s proposed annual expense ratios and tickers weren’t included in the filing. It will have its primary listing on the Nasdaq.

 

Hung Tran is a former staff writer for etf.com.