First Trust Long Duration Opportunities ETF (ARCA: LGOV)

Latest news for First Trust Long Duration Opportunities ETF (ARCA:LGOV)

First Trust Long Duration Opportunities ETF

Under normal market conditions, the Fund will invest at least 80 percent of its net assets (including investment borrowings) in a portfolio of investment-grade debt securities issued or guaranteed by the U.S. government, its agencies or government-sponsored entities, including publicly-issued U.S. Treasury securities and mortgage-related securities. The Fund may also invest in exchange-traded funds (ETFs) that principally invest in such securities. As discussed in more detail below, the Fund may purchase mortgage-related securities in to-be-announced transactions (TBA Transactions), including mortgage dollar rolls. The Fund includes cash set aside or otherwise held as collateral for settling mortgage dollar rolls and other TBA Transactions towards its 80 percent investment requirement. The Funds investment advisor seeks to manage the Funds portfolio to have a weighted average effective duration of eight or more years. Duration, which is discussed in more detail below, measures a debt securitys expected life on a present value basis, taking into account the debt securitys yield, interest payments and final maturity.

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Last year, fixed income exchange traded funds accounted for nearly <a href="https://www.benzinga.com/analyst-ratings/analyst-color/19/01/12931695/investors-piled-into-bond-etfs-last-year">a third of all ETF inflows</a>. With the Federal Reserve having raised interest rates four times, many of 2018&#39;s most popular bond ETFs were short-term bond funds.

A new fixed income ETF eschews short-term in favor of longer duration fare.

<h3>What Happened</h3>

The actively managed First Trust Long Duration Opportunities ETF (NYSE:<a class="ticker" href="/stock/LGOV#NYSE">LGOV</a>) debuted Wednesday and is the <a href="https://www.benzinga.com/trading-ideas/long-ideas/19/01/12939268/a-new-bond-etf-to-manage-duration-risk">second new fixed income</a> ETF launched by Illinois-based First Trust this year.

LGOV&#39;s &ldquo;primary investment objective is to generate current income with a focus on preservation of capital. Under normal market conditions, the Fund will invest at least 80% of its net assets (including investment borrowings) in a portfolio of investment-grade debt securities issued or guaranteed by the U.S. government, its agencies or government-sponsored entities, including publicly-issued U.S. Treasury securities and mortgage-related securities,&rdquo; <a href="https://www.ftportfolios.com/Retail/etf/etfSummary.aspx?Ticker=LGOV">according to First Trust</a>.

<h3>Why It&#39;s Important</h3>

LGOV comes to market amid diminishing expectations that the Federal Reserve will tighten rates this year at a pace comparable to 2018&#39;s. Some fixed income market observers believe it&#39;s possible the Fed doesn&#39;t hike rates at all this. If proven accurate, that forecast could help investors renew their taste for higher-yielding, long duration bond ETFs.

The new ETF could emphasize mortgage-backed securities as an avenue for reducing investors&#39; exposure to bond equity volatility.

&ldquo;The portfolio managers believe mortgage-backed securities (MBS) are an important piece of a diversified portfolio due to their low correlation to other core asset classes and positive credit quality trend,&rdquo; said First Trust <a href="https://www.businesswire.com/news/home/20190123005474/en/Trust-Launches-Trust-Long-Duration-Opportunities-ETF">in a statement</a>.

LGOV&#39;s management team considers global macroeconomic factors, broad fixed income trends and valuations across various MBS segments, among other factors, when considering additions to the fund.

<h3>What&#39;s Next</h3>

The new ETF charges 0.65 percent per year, or $65 on a $10,000 investment.

Earlier this month, First Trust introduced the First Trust Low Duration Strategic Focus ETF (NASDAQ:<a class="ticker" href="/stock/LDSF#NASDAQ">LDSF</a>), an actively managed, low duration fund.

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First Trust Long Duration Opportunities ETF

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Latest news for First Trust Long Duration Opportunities ETF (ARCA:LGOV)

Thursday, January 24, 2019

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