First Trust launches actively managed income ETFs

Sep 28th, 2016 | By | Category: Equities

US-based exchange-traded fund provider First Trust has launched two new actively managed ETFs for income investors: the First Trust CEF Income Opportunity ETF (Nasdaq: FCEF), and the First Trust Municipal CEF Income Opportunity ETF (Nasdaq: MCEF). Both funds invest primarily in US-listed closed-end funds (CEFs).

First Trust launches actively managed income opportunities ETFs

Ken Fincher, Senior Vice President at First Trust.

First Trust will serve as the advisor to the funds with portfolio manager Ken Fincher responsible for the funds’ day-to-day management.

FCEF is mandated to invest in a broad range of CEFs including those with exposures to dividend-focused equities, high yield debt, investment grade debt, and real estate investment trusts (REITs).

MCEF invests primarily in CEFs that are exposed to municipal debt securities, providing income for US investors that is exempt from federal income tax.

Through active management, the funds will attempt to exploit pricing irregularities of the CEFs. CEF shares are not redeemable, but are bought and sold on secondary markets with their prices determined through supply and demand. As such, CEFs may trade at a premium or a discount to their net asset value, offering potential investment opportunities.

Ken Fincher, Senior Vice President at First Trust, commented: “Advisors and their investors have been underserved when it comes to actively managed solutions in the closed-end fund space. We believe through our rigorous proprietary model and years of experience in the CEF space that we can provide advisors and their investors with a better overall experience.”

FCEF and MCEF have total expense ratios of 2.50% and 1.91% respectively, taking into account acquired fund fees and expenses of investing in the underlying CEFs.

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