First Trust, the Wheaton, Ill.-based fund company known for niche strategies, today launched a non-U.S.-focused diversified income ETF, the International Multi-Asset Diversified Income Index Fund (YDIV)—a follow-on to the firm’s similar but U.S.-focused fund, “MDIV.”
More broadly, the new fund comes at a time when investors are scouring the universe of securities for ways to generate income. Many fear that bond prices are heading for a sharp correction as a 30-year bull market runs its course.
The ETF market is increasingly crowded with securities designed to meet the income need by casting a wide, multi-asset class net. The addition of an internationally focused fund keeps First Trust up to date with broader trends in the market for income-generating funds.
Among those existing funds, and their assets, are:
- First Trust Multi-Asset Diversified Income ETF (MDIV), $486 million
- SPDR SSgA Income Allocation (INKM), $106 million
- iShares Morningstar Multi-Asset Income Index Fund (IYLD), $105 million
- Arrow Dow Jones Global Yield ETF (GYLD), $77 million
The fixed-income ETF in which YDIV invests will take up 15 percent of the fund’s holdings and, according to a recent updated prospectus, will be an ETF that invests mainly in junk bonds.
In addition to a 15 percent allocation to a junk ETF, YDIV will carve out 25 percent of its portfolio for dividend-paying securities and divide up the remaining 60 percent equally between REITs, preferred securities and infrastructure companies, which will each claim 20 percent of YDIV’s holdings.
YDIV will track the Nasdaq International Multi-Asset Diversified Income Index and cost investors $79 per $10,000 invested, for a total expense ratio of 79 basis points. The fund, as noted, is listed on Nasdaq.
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