First Trust’s New Equity Income ETF Begins Trading

First Trust Portfolios, home to 196 exchange-traded funds, is bringing its dividend plus options strategy to the equity market with the Cboe Vest Rising Dividend Achievers Target Income ETF (RDVI).  

The fund began trading Oct. 20 on the Cboe, according to a statement from Wheaton, Illinois-based First Trust, which manages $33.6 billion, according to ETF.com data. The actively managed fund charges an expense ratio of 0.75%. The price jumped more than 1% during midday trading hours to $19.87 as a little over 1,000 shares were traded, according to Yahoo Finance data. 

The launch comes at a troubling time for U.S. ETFs and equity markets, with the S&P 500 plummeting more than 22% year to date and the Nasdaq losing 32%. The U.S. ETF market contracted sharply last month: Total assets dropped by $520 billion to $5.91 trillion, according to a CFRA Research note. 

RVDI’s closest peers, the Amplify CWP Enhanced Dividend Income ETF (DIVO) and the JPMorgan Equity Premium Income ETF (JEPI), have both fallen nearly 10% year to date, according to ETF.com data.  

The new fund uses a proprietary target income strategy created by Cboe Vest Financial. It will invest in U.S.-based equities within the Nasdaq US Rising Dividend Achievers Index and sell call options on the S&P 500 Index or ETFs that track the S&P 500 Index. 

“Investors are, more than ever, challenged to find quality sources of income without increasing risk in their portfolios,” Cboe Vest President Jeff Chang said in a statement. He said RDVI aims to offer investors access to “an alternative form of consistent income.”  

Contact Shubham Saharan at [email protected]   

[Editor's Note: An earlier version of this article incorrectly stated "securities" when referring to call options.]