First Trust launches First Trust Preferred Securities and Income ETF

By Toni Weeks

San Luis Obispo, Calif., Feb. 12 - First Trust Advisors LP has launched the First Trust Preferred Securities and Income ETF, according to a press release.

The new exchange-traded fund seeks total return and current income by investing at least 80% of its net assets, including investment borrowings, in preferred securities and income-producing debt securities, which may include corporate bonds, high-yield securities and convertible securities. The fund invests in securities that are traded over-the-counter or listed on an exchange and may invest in both U.S. and non-U.S. debt and securities. The anticipated average duration of the securities held by the fund is three to 12 years.

Because issuers of preferreds are often financial companies, the fund invests at least 25% of its total assets in the financial sector. In addition, at least 60% of the fund's net assets are invested in securities rated investment grade at the time of purchase.

Stonebridge Advisors LLC will serve as the fund's subadviser and manage its portfolio.

"We believe that preferred securities are an important component of a well-diversified portfolio," Stonebridge president and chief investment officer Scott Fleming said in the release. "This fund's structure as an actively managed ETF gives us the opportunity to manage the fund, not only to seek income and total return but also to react to market conditions and work to safeguard capital during changes in the market, especially if interest rates start to rise."

According to a 497K filing with the Securities and Exchange Commission, Fleming is a member of the fund's portfolio management team, which also includes Robert Wolf, Allen Shepard and Danielle Salters.

Because they are senior in the capital structure, preferreds have historically proven to be a more reliable source of income than common stocks and have produced a more stable stream of income, according to the release.

"With the current opportunity in the preferred securities space, the fund may allow investors to potentially earn high yields while mitigating risk in various market environments," First Trust chief market strategist Robert Carey commented in the release. "By focusing on market inefficiencies, along with the fund's active management style, the portfolio managers can potentially provide a way for investors to seek attractive returns and diversified exposure to income-producing preferred securities."

The fund trades on the NYSE Arca under the symbol "FPE."

There are no shareholder fees. Total annual fund operating expenses are expected to be 0.85%, which is comprised solely of a management fee.

Wheaton, Ill.-based First Trust Advisors is the investment adviser for the fund.

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