Low Duration ETF Of ETFs Debuts

January 07, 2019

On Friday, First Trust rolled out an actively managed ETF-of-ETFs that offers exposure to low-duration fixed-income securities. The First Trust Low Duration Strategic Focus ETF (LDSF) is one of the first ETFs to launch in 2019.

The fund comes with an expense ratio of 0.86% and lists on the Nasdaq stock exchange.

LDSF targets an effective portfolio duration of no more than three years, with duration essentially measuring how sensitive a security is to changes in interest rates. With the Fed hiking interest rates four times last year, there is more demand for strategies that seek to minimize duration.

The fund will primarily invest in other ETFs, many of which are expected to be issued by First Trust, with significant allocations to the First Trust Low Duration Opportunities ETF (LMBS) and the First Trust Senior Loan Fund (FTSL) expected. The firm’s approach combines a top-down analysis of macroeconomic factors with a bottom-up analysis that considers elements affecting the fixed-income space, including rates, duration, credit, currency and current asset valuations, the prospectus says.

In November, First Trust launched the First Trust Short Duration Managed Municipal ETF (FSMB) and the First Trust Ultra Short Duration Municipal ETF (FUMB).

Contact Heather Bell at [email protected]

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