FSIG Profile
The First Trust Limited Duration Investment Grade Corporate ETF is an actively managed fund designed to provide investors with exposure to high-quality corporate debt while maintaining a focus on short to intermediate-term maturities. Under normal market conditions, the fund invests at least 80% of its net assets, including any borrowings for investment purposes, in investment-grade corporate debt securities. This investment strategy ensures a portfolio composed predominantly of high-quality corporate bonds, aiming to balance risk and return by focusing on securities with strong credit ratings.
The fund’s investment approach includes maintaining a portfolio with a weighted average duration that is within one year of the Bloomberg U.S. Corporate 1-5 Year Index. This duration targeting helps manage interest rate risk by aligning the fund’s sensitivity to interest rate changes with that of the benchmark index, which tracks short to intermediate-term investment-grade corporate bonds. By doing so, the fund aims to provide stable returns while minimizing the impact of interest rate fluctuations on its portfolio.
In addition to its core holdings in investment-grade corporate debt, the fund may allocate up to 20% of its net assets to debt securities of any credit quality. This flexibility allows the fund to invest in a broader range of corporate bonds, including those with lower credit ratings, which may offer higher yields. However, this allocation is limited to ensure that the fund primarily maintains its focus on investment-grade securities while seeking opportunities to enhance returns.
The First Trust Limited Duration Investment Grade Corporate ETF is non-diversified, which means that its investments may be concentrated in fewer securities compared to a diversified fund. This concentration can lead to higher volatility and risk, but also offers the potential for higher returns based on the fund's targeted investment strategy. Investors should consider this focus within the context of their broader investment objectives and risk tolerance, particularly if they are seeking a managed approach to high-quality corporate bonds with a short to intermediate duration profile.
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