First Trust has expanded its already impressive ETF collection with the unveiling of the First Trust Commercial Mortgage Opportunities ETF (NYSE Arca: CAAA) and the First Trust Structured Credit Income Opportunities ETF (NYSE Arca: SCIO).
Unlocking the Realm of Mortgage-Backed Securities
With an expense ratio of 0.55%, CAAA delves into commercial mortgage-backed securities, aiming for sustainable long-term growth. The fund’s core focus lies on CMBS, with a lion’s share expected to boast an “AAA” rating. While predominantly concentrating on non-agency CMBS, CAAA also has the flexibility to hold other forms of securities.
The fund is restricted from investing in any security below A-. Nonetheless, it retains the liberty to keep securities already in its portfolio even if downgraded below the minimum requirement, as outlined in the prospectus.
“Seekers of diversified, high-quality income streams can now turn their attention to CAAA. With a portfolio anticipated to comprise 90% AAA CMBS bonds, the strategy taps into income streams traditionally monopolized by banks and institutional investors: commercial real estate loans. The ever-evolving commercial real estate sector undoubtedly presents its fair share of challenges,” remarked First Trust Portfolio Manager Owen Aronson.
“By coupling AAA CMBS bonds—featuring a senior claim on already senior commercial mortgages—with active portfolio management, the fund presents a compelling investment proposition,” he added.
Exploring the Realm of Structured Credit Investments
On the other hand, SCIO boasts an expense ratio of 0.95% and predominantly invests in structured credit investments. Like CAAA, SCIO capitalizes on active management but steers towards long-term income generation. The fund’s portfolio spans residential mortgage-backed securities, CMBS, collateralized loan obligations, asset-backed securities, and other financial instruments. Furthermore, the prospectus indicates that SCIO may also venture into other funds holding structured credit investments.
“As we fortify First Trust’s assortment of actively managed fixed income ETFs, we are thrilled to offer investors an intriguing opportunity in the structured credit market through SCIO. Investors will gain access to the appealing yields traditionally associated with private fund markets. First Trust’s wealth of talent, track record of success in the domain, and disciplined risk management approach position SCIO as an attractive option for well-diversified portfolios,” stated First Trust Senior Portfolio Manager Jeremiah Charles.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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