Daily ETF Watch: New ‘Strategic Income’ Fund

First Trust to roll out multistrategy, multimanager ETF.

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Reviewed by: Heather Bell
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Edited by: Heather Bell

First Trust to roll out multistrategy, multimanager ETF.

With investors preoccupied with finding yield, First Trust is set to roll out an actively managed, multi-manager fund that lists risk-adjusted income as its primary objective and capital appreciation as its secondary goal in its prospectus.

According to a Nasdaq communique, the First Trust Strategic Income ETF (FDIV) will launch on Thursday, August 14. The rather complex fund will invest in six different categories of assets, and each asset type will have a different strategy associated with it.

The fund’s prospectus lists four subadvisors—First Trust Global Portfolios Ltd; Energy Income Partners, LLC; Stonebridge Advisors LLC; and Richard Bernstein Advisors—that will essentially divide up the various asset categories among each other, each taking on one or more.

Those asset categories, according to the prospectus, include high-yield corporate bonds and senior floating-rate loans; mortgage-related investments; preferred securities; international sovereign bonds; energy infrastructure equities; and high-dividend equity securities.

Among the fund’s allowed investments are other ETFs and short exposures, as well as a variety of derivatives, including covered calls.

FDIV will come with an expense ratio of 0.87 percent, or $87 per $10,000 in assets.

Last month, AdvisorShares rolled out the actively managed Sunrise Global Multi-Strategy ETF (MULT), which targets absolute returns while employing multiple strategies.

Unlike FDIV, MULT has only one subadvisor—Sunrise Capital Partners—and targets a wide range of assets (equity, fixed income, currency and commodity), including other ETFs, and can take short positions and implement derivatives in its strategies. It employs a variety of strategies, including momentum, pattern recognition and mean reversion.

MULT comes with a much larger expense ratio: 1.89 percent.

The largest fund in the space however, is the IQ Hedge Multi-Strategy Tracker ETF (QAI | B-73) from IndexIQ, with more than $800 million in assets under management. The fund tracks an index that basically encompasses multiple hedge-fund-replication subindexes that target global macro, long/short, fixed-income arbitrage. QAI mostly invests in other ETFs. It has an expense ratio of 0.94%.

 

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.