First Trust is famous for its unique approach under which the issuer looks to offer better or more targeted exposure to a given asset class. Of late, the issuer has been beefing up its portfolio with fresh-themed products in a space which it has already entered and exploring new arenas as well.
Such a maiden zone is the mortgage-backed securities space. The issuer has come out with a brand new product – First Trust Low Duration Mortgage Opportunities ETF (LMBS) – the first such mortgage-backed securities (MBS) fund for First Trust.
LMBS in Focus
The actively managed fund seeks to provide exposure to mortgage-backed debt securities and other mortgage-oriented products associated with residential and commercial mortgages, per the issuer. The fund involves securities with high investment grade with at least three-fifth of assets being government-sponsored and lower ‘expected price sensitivity to the credit cycle’. The fund charges 65 bps in fees a year for this exposure.
This approach results in the fund holding a basket of 36 securities. The portfolio’s average effective duration will typically be not more than three years. The portfolio is widely diversified with no product accounting for more than 2.20% of the basket. However, what makes the fund different from other MBS ETFs is that unlike other funds, LMBS seeks to limit the duration extension.