That outperformance is partially due to the fund’s inclusion of foreign corporate issues, as well as its active manger’s ability to try to buy and sell credits before they are added or dropped from benchmarks. The chart below shows the three funds’ year-to-date performance:
First Trust Preferred Securities & Income ETF (FPE)
FPE has seen $613.5 million in new inflows this year and sets out to generate income by investing globally in preferred equities and income-producing debt from companies of all market capitalizations.
The fund’s focus is on preferred stocks — equities that behave a lot like fixed income — and to a good result: 30-day yield in this portfolio is 5.65 percent.
Between banks, insurance and capital markets, more than 60 percent of the portfolio is tied to financials. And most of the securities in the mix are floating rate — 10 percent — and fixed-to-floating at 66 percent. Only 22 percent are fixed-rate securities in a portfolio that otherwise carries sizable interest rate risk due to its average effective duration exceeding four years.
In all, FPE is up 7.7 percent so far this year, as the chart below shows. The fund has $2.2 billion in total assets, and has a 0.85 percent expense ratio.
First Trust Senior Loan Fund (FTSL)
FTSL has seen $456 million in net creations year-to-date, and is another fund that’s growing in popularity with investors thanks to its focus on floating-rate securities—at a time of rising rates—and on high-income-generating bonds and equities.
The fund is noticeably more expensive than competing SRLN, with its 0.86 percent expense ratio, but it’s still gaining a following, particularly with the trader crowd, according to our research. FTSL trades more than $6 million on average every day, and it has nearly $1.3 billion in total assets today.
Unlike SRLN, FTSL’s performance hasn’t been as strong this year, but like SRLN, the fund has been able to outperform competing passive funds.
Charts courtesy of StockCharts.com
— By Cinthia Murphy, ETF.com