First Trust rolls out actively managed high yield bond ETF

Dec 16th, 2015 | By | Category: Fixed Income

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First Trust Global Portfolios, a leading provider of exchange-traded funds, has launched a new actively managed ETF targeting high yield fixed income exposure. The First Trust Tactical High Yield UCITS Fund seeks to generate a high level of income while also achieving capital appreciation through investment in US and non-US corporate bonds, convertible bonds and bank loans. The fund is managed by First Trust’s affiliate, First Trust Advisors (FTA).

First Trust rolls out actively managed high yield bond ETF

William Housey, CFA, Senior Vice President and Senior Portfolio Manager at First Trust Advisors.

“The historically low interest rates in today’s market present challenges for investors seeking income, but we believe this fund offers a long-term solution within a risk-managed framework for high yield investors,” says William Housey, CFA, Senior Vice President and Senior Portfolio Manager at FTA, who serves as the Fund’s Senior Portfolio Manager.

The actively managed structure allows the fund’s management to pursue a greater range of strategies than its passively managed counterparts, affording the fund the flexibility to respond proactively in a variety of market conditions. Although the fund is classified as high yield, a mandate exists for holding a portion of the portfolio in investment grade bonds, both corporate issues and Treasuries. This allows management to adjust the profile of the fund to better protect investor wealth in adverse conditions.

Furthermore, the ability to short sell bonds reduces duration risk in the fund if rates are rising as well as providing a means to profit if management perceives certain individual securities may underperform the high yield market. The fund may also pursue long/short strategies, exploiting mis-pricings between securities and potentially profiting regardless of the directional movement of the market.

“At a time when investors are growing concerned about increasing interest rates on their fixed income portfolios and idiosyncratic challenges within credit markets, FTA is offering investors a way to potentially capitalise on the opportunities created by such fear-induced volatility,” added Housey.

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