First Trust Files For Multi-Asset Income ETF

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Stocks have been charging higher all week, bolstered by reassuring commentary from Chairman Bernanke during his most recent testimony to Congress along with several better-than-expected housing market economic data releases on the homefront. Nonetheless, choppy trading remains a dominant theme across equity markets as investors continue to cope with looming threats from Europe and a pessimistic outlook for the U.S. recovery. Amidst the improving sentiment on Wall Street, several issuers rolled out new products, pushing the total number of ETPs closer and closer to the 1,500 mark. Vack Eck added an ex-financials preferred stock ETF to its lineup while Global X launched a “Super Income” preferred stock ETF of its own, giving investors more tools for beefing up their current income [see also 46 Amusing ETF Ticker Symbols].

Illinois-based First Trust has laid the groundwork for a new multi-asset income ETF in its most recent proposal [see SEC Filing]:

  • First Trust Global Tactical Asset Allocation And Income Fund: The investment objective behind this ETF will be to deliver total positive returns and provide current income while maintaining a consistent risk profile. This actively-managed ETF will be structured as a fund-of-funds, meaning it will invest in other ETFs and ETNs, covering anywhere from 15 to 20 unique asset classes. The filing also mentioned that the ETF will seek to generate additional current income for investors by utilizing an option overlay strategy; call options are sold on a portion of the fund’s holdings to supplement their respective yields [see also Monthly Dividend ETFdb Portfolio].
Multi-Asset ETFs In Focus

The proposed First Trust ETF will compete with several dozen Multi-Asset ETFs already on the market. By far the most popular ETF in this space is the WisdomTree Managed Futures Strategy Fund (WDTI); this offering has the flexibility to establish both long and short positions in a number of different asset classes, giving it the potential to generate positive returns in all types of markets as well as achieving a low correlation with broad equity benchmarks. WDTI is also actively managed, charges 0.95% in annual expense fees, and commands close to $160 million in assets under management since launching in early 2011.

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Disclosure: No positions at time of writing.

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