An actively managed ETF that is not tethered to a traditional
First Trust Advisors L.P. (“First Trust”), a leading exchange-traded fund
(“ETF”) provider and asset manager, announced today that it has launched
a new actively managed ETF, the First Trust TCW Unconstrained Plus Bond
ETF (NYSE Arca: UCON) (the “fund”). The portfolio is sub-advised and
managed by TCW Investment Management Company LLC (“TCW”). The fund’s
managers look for value across a range of global fixed income market
segments seeking to maximize long-term total return.
The fund is managed in an “unconstrained” manner, meaning that its
investment universe is not limited to the securities of any particular
index and TCW may invest in fixed income securities of any type or
credit quality. Unlike index-based strategies, unconstrained strategies
provide a flexible, adaptable, go anywhere approach. TCW’s fixed income
management philosophy applies a long-term value discipline emphasizing
fundamental bottom-up research, which seeks to identify securities that
are undervalued and offer a superior risk/return profile. “We are very
pleased to expand our relationship with First Trust in launching the
First Trust TCW Unconstrained Plus Bond ETF,” said Stephen Kane, CFA,
Group Managing Director and Portfolio Manager at TCW. “Our portfolio
management team takes a full-cycle, value approach to managing fixed
income. With a high level of flexibility to manage the portfolio around
duration, sector and quality exposures, we plan to focus the portfolio
on our best research ideas, while seeking to protect investors in
difficult markets as well as achieve attractive returns in environments
where we see compelling valuations.”
“This actively-managed ETF provides another tool for investment advisors
to build portfolios for their clients, leveraging the best thinking of
the world-class team at TCW. As interest rate volatility has returned
this year, we believe professional management for fixed income assets is
more important than ever,” said Ryan Issakainen, CFA, Senior Vice
President, ETF Strategist at First Trust.
In addition to Stephen Kane, the fund’s portfolio management team from
TCW includes Tad Rivelle, Chief Investment Officer, Co-Director – Fixed
Income, Portfolio Manager; Laird Landmann, Co-Director – Fixed Income,
Portfolio Manager; and Bryan T. Whalen, CFA, Group Managing Director,
Portfolio Manager. The portfolio managers are jointly responsible for
the day-to-day management of the fund.
About First Trust
First Trust Advisors L.P., a federally registered investment advisor,
and its affiliate First Trust Portfolios L.P., a FINRA registered
broker-dealer, are privately held companies that provide a variety of
investment services. First Trust Advisors L.P. is the investment advisor
to ETFs, closed-end funds, mutual funds, separate managed accounts and
provides supervisory services to First Trust Portfolios L.P. sponsored
unit investment trusts (“UITs”). First Trust Advisors L.P.’s collective
assets under management and supervision were approximately $122 billion
as of April 30, 2018. This includes the supervisory services First Trust
Advisors L.P. provides to First Trust Portfolios L.P. sponsored UITs,
which are unmanaged. First Trust Portfolios L.P. is a sponsor of UITs
and distributor of mutual fund shares and ETF creation units. The firms
are based in Wheaton, Illinois. For more information, visit https://www.ftportfolios.com.
About TCW Investment Management Company LLC
TCW Investment Management Company LLC is a wholly owned subsidiary of
The TCW Group, Inc. (TCW Group), which is a leading global asset
management firm with nearly five decades of investment experience.
Established in 1971 in Los Angeles, California, TCW Group manages a
broad range of products across fixed income, equities, emerging markets
and alternative investments. Through the TCW, MetWest and TCW
Alternative Fund Families, TCW manages one of the largest mutual fund
complexes in the U.S. Its clients include many of the world’s largest
corporate and public pension plans, financial institutions, endowments
and foundations, as well as financial advisors and high net worth
individuals. With a high level of employee ownership, TCW is committed
to providing disciplined, team-managed investment processes that have
been tested across market cycles. As of March 31, 2018, TCW Group had
$202 billion in assets under management, with nearly $180 billion of
that in fixed income.
You should consider the fund’s investment objectives, risks, and
charges and expenses carefully before investing. Contact First Trust
Portfolios L.P. at 1-800-621-1675 to obtain a prospectus or summary
prospectus which contains this and other information about the fund. The
prospectus or summary prospectus should be read carefully before
The fund lists and principally trades its shares on the NYSE Arca.
Investors buying or selling fund shares on the secondary market may
incur customary brokerage commissions. Market prices may differ to some
degree from the net asset value of the shares. Investors who sell fund
shares may receive less than the share’s net asset value. Shares may be
sold throughout the day on the exchange through any brokerage account.
However, unlike mutual funds, shares may only be redeemed directly from
the fund by authorized participants, in very large creation/redemption
units. If the fund’s authorized participants are unable to proceed with
creation/redemption orders and no other authorized participant is able
to step forward to create or redeem, fund shares may trade at a discount
to the fund’s net asset value and possibly face delisting.
The fund’s shares will change in value, and you could lose money by
investing in the fund. One of the principal risks of investing in the
fund is market risk. Market risk is the risk that a particular security
owned by the fund, fund shares or securities in general may fall in
value. The fund is subject to management risk because it is an actively
managed portfolio. In managing the fund’s investment portfolio, the
sub-advisor will apply investment techniques and risk analyses that may
not have the desired result. There can be no guarantee that the fund
will meet its investment objectives.
The fund is subject to credit risk, call risk, income risk, inflation
risk, interest rate risk, extension risk and prepayment risk. Credit
risk is the risk that an issuer of a security will be unable or
unwilling to make dividend, interest and/or principal payments when due
and that the value of a security may decline as a result. Credit risk is
heightened for the bank loans in which the fund invests because
companies that issue such loans tend to be highly leveraged and thus are
more susceptible to the risks of interest deferral, default and/or
bankruptcy. Call risk is the risk that if an issuer calls
higher-yielding debt instruments held by the fund, performance could be
adversely impacted. Income risk is the risk that income from the fund’s
fixed income investments could decline during periods of falling
interest rates. Inflation risk is the risk that the value of assets or
income from investments will be less in the future as inflation
decreases the value of money. Interest rate risk is the risk that the
value of the fixed income securities in the fund will decline because of
rising market interest rates. Extension risk is the risk that, when
interest rates rise, certain obligations will be paid off by the issuer
(or obligor) more slowly than anticipated, causing the value of these
securities to fall. Prepayment risk is the risk that during periods of
falling interest rates, an issuer may exercise its right to pay
principal on an obligation earlier than expected. This may result in a
decline in the fund’s income.
Certain of the fixed-income securities in the fund may not have the
benefit of covenants which could reduce the ability of the issuer to
meet its payment obligations and might result in increased credit risk.
High-yield securities, or “junk” bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and
therefore, may be highly speculative. These securities are issued by
companies that may have limited operating history, narrowly focused
operations, and/or other impediments to the timely payment of periodic
interest and principal at maturity. Lower quality debt tends to be less
liquid than higher quality debt.
The risks associated with senior loans are similar to the risks of
high-yield fixed income instruments. The loans are usually rated below
investment grade but may also be unrated.
Mortgage-related securities, including mortgage-backed securities, are
more susceptible to adverse economic, political or regulatory events
that affect the value of real estate. Certain asset-backed securities do
not have the benefit of the same security interest in the related
collateral as do mortgage-backed securities, nor are they provided
government guarantees of repayment.
Non-agency debt that are not issued by a government-sponsored entity
such as Fannie Mae, Freddie Mac and Ginnie Mae, are not afforded the
protections of backing by the U.S. government, making them more
susceptible to credit, liquidity and other risks.
The Fund’s investment in municipal securities subjects them to municipal
obligations risk. Issuers, including governmental issuers, may be unable
to pay their obligations as they come due. The values of municipal
obligations that depend on a specific revenue source to fund their
payment obligations may fluctuate as a result of actual or anticipated
changes in the cash flows generated by the revenue source or changes in
the priority of the municipal obligation to receive the cash flows
generated by the revenue source.
The use of listed and OTC derivatives, including futures, options, swap
agreements and forward contracts, can lead to losses because of adverse
movements in the price or value of the underlying asset, index or rate,
which may be magnified by certain features of the derivatives. These
risks are heightened when the fund’s portfolio managers use derivatives
to enhance the fund’s returns or as a substitute for a position or
security, rather than solely to hedge (or offset) the risk of a position
or security held by the fund.
In a falling inflationary environment, both interest payments and the
value of Treasury Inflation Protected Securities (“TIPS”) will decline.
Securities issued or guaranteed by federal agencies and U.S. government
sponsored instrumentalities may or may not be backed by the full faith
and credit of the U.S. government.
As the use of Internet technology has become more prevalent in the
course of business, the fund has become more susceptible to potential
operational risks through breaches in cyber security.
Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of
securities; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; different legal or accounting
standards and less government supervision and regulation of exchanges in
foreign countries. These risks may be heightened for securities of
companies located in, or with significant operations in, emerging market
countries. Changes in currency exchange rates and the relative value of
non-U.S. currencies will affect the value of the fund’s investment and
the value of fund shares. Because the fund’s net asset value is
determined on the basis of U.S. dollars, you may lose money if the local
currency of a foreign market depreciates against the U.S. dollar.
Illiquid securities and restricted securities involve the risk that the
securities will not be able to be sold at the time desired by the fund
or at prices approximately the value at which the fund is carrying the
securities on its books.
Collateralized loan obligations (“CLOs”) carry additional risks,
including, the possibility that distributions from collateral securities
will not be adequate to make interest or other payments, the quality of
the collateral may decline in value or default, the possibility that the
investments in CLOs are subordinate to other classes or tranches, and
the complex structure of the security may not be fully understood at the
time of investment and may produce disputes with the issuer or
unexpected investment results.
If a counterparty defaults on its payment obligations, the fund will
lose money and the value of fund shares may decrease. The fund’s
investment in repurchase agreements may be subject to market and credit
risk with respect to the collateral securing the agreements.
Investments in sovereign bonds involve special risks because the
governmental authority that controls the repayment of the debt may be
unwilling or unable to repay the principal and/or interest when due. In
times of economic uncertainty, the prices of these securities may be
more volatile than those of corporate debt obligations or of other
government debt obligations.
The fund is classified as “non-diversified” and may invest a relatively
high percentage of its assets in a limited number of issuers. As a
result, the fund may be more susceptible to a single adverse economic or
regulatory occurrence affecting one or more of these issuers, experience
increased volatility and be highly concentrated in certain issuers.
The fund will, under most circumstances, effect a portion of creations
and redemptions for cash, rather than in kind securities. As a result,
the fund may be less tax efficient.
The fund currently has fewer assets than larger, more established funds,
and like other relatively new funds, large inflows and outflows may
impact the fund’s market exposure for limited periods of time.
First Trust Advisors L.P. is the adviser to the fund. First Trust
Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund’s
The information presented is not intended to constitute an investment
recommendation for, or advice to, any specific person. By providing this
information, First Trust is not undertaking to give advice in any
fiduciary capacity within the meaning of ERISA and the Internal Revenue
Code. First Trust has no knowledge of and has not been provided any
information regarding any investor. Financial advisors must determine
whether particular investments are appropriate for their clients. First
Trust believes the financial advisor is a fiduciary, is capable of
evaluating investment risks independently and is responsible for
exercising independent judgment with respect to its retirement plan
Duration is a measure of a bond’s sensitivity to interest rate changes
that reflects the change in a bond’s price given a change in yield. It
accounts for the likelihood of changes in the timing of cash flows in
response to interest rate movements.
This article provided by NewsEdge.