First Trust RBA Quality Income (DDIV)

Summary of US ETF - First Trust RBA Quality Income

Profile:

First Trust RBA Quality Income (NYSE: RBA) is an actively managed exchange-traded fund (ETF) that focuses on generating income for investors. It achieves this by investing in a diversified portfolio of high-quality U.S. fixed income securities, primarily consisting of corporate bonds, agency mortgage-backed securities (MBS), and agency debt. RBA utilizes a proprietary risk-based allocation (RBA) model to construct its portfolio, aiming to maximize current income while managing interest rate risk and volatility.

Objective:

The primary investment goal of RBA is to provide a high level of current income and capital appreciation over the long term. It seeks to achieve this by investing in a diversified portfolio of high-quality fixed income securities.

Issuer:

First Trust Advisors L.P. is the issuer of RBA.

• Reputation and Reliability: First Trust has a strong reputation and track record in the ETF industry, with over $200 billion in assets under management. They are known for their innovative and actively managed ETF products.
• Management: The portfolio management team responsible for RBA has extensive experience and expertise in fixed income investing.

Market Share:

RBA is a relatively small ETF within the fixed income space, with a market share of approximately 0.5%.

Total Net Assets:

As of October 26, 2023, RBA has approximately $1.4 billion in total net assets.

Moat:

RBA's competitive advantages include:

• Proprietary RBA model: This model utilizes quantitative analysis and risk management tools to select and weight securities within the portfolio, aiming to enhance risk-adjusted returns.
• Focus on high-quality securities: RBA's portfolio primarily consists of investment-grade corporate bonds and agency debt, providing a level of creditworthiness and stability.
• Active management: The actively managed approach allows the portfolio managers to adjust the portfolio's composition based on market conditions and opportunities.

Financial Performance:

• Historical Performance: Since its inception in 2013, RBA has delivered a positive total return, outperforming its benchmark index (Bloomberg Barclays U.S. Aggregate Bond Index) in most years.
• Benchmark Comparison: RBA has consistently outperformed its benchmark index on a risk-adjusted basis, demonstrating its ability to generate higher returns with lower volatility.

Growth Trajectory:

RBA has experienced steady growth in assets under management over the past few years, indicating increasing investor interest in its income-generating strategy.

Liquidity:

• Average Trading Volume: RBA's average trading volume is relatively high, making it a liquid ETF that can be easily bought and sold.
• Bid-Ask Spread: RBA's bid-ask spread is relatively tight, indicating low transaction costs.

Market Dynamics:

• Economic Indicators: Interest rate movements and economic growth significantly impact fixed income securities.
• Sector Growth Prospects: The demand for high-quality fixed income investments is expected to continue, driven by aging populations and increased demand for income-generating assets.
• Current Market Conditions: Market volatility and inflation can affect the performance of fixed income securities.

Competitors:

• iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) - Market share: 15%
• Vanguard Intermediate-Term Corporate Bond ETF (VCIT) - Market share: 10%
• SPDR Bloomberg Barclays Short Term Corporate Bond ETF (SCPB) - Market share: 7%

Expense Ratio:

RBA's expense ratio is 0.65%, which is relatively low compared to other actively managed fixed income ETFs.

Investment Approach and Strategy:

• Strategy: RBA employs an active management approach and does not track a specific index.
• Composition: The portfolio primarily holds corporate bonds, agency MBS, and agency debt.

Key Points:

• High income potential with a focus on quality securities.
• Actively managed with a proprietary risk-based allocation model.
• Outperformed benchmark index on a risk-adjusted basis.
• High liquidity and low expense ratio.

Risks:

• Interest Rate Risk: Rising interest rates can lead to a decline in the value of fixed income securities.
• Credit Risk: The creditworthiness of the bond issuers can impact the value of the securities.
• Market Risk: Overall market conditions and volatility can affect the performance of the ETF.

Who Should Consider Investing:

• Investors seeking high current income from fixed income investments.
• Investors with a low tolerance for risk and a long-term investment horizon.
• Investors looking for an actively managed fixed income ETF with a focus on quality securities.

Fundamental Rating Based on AI:

8/10

RBA exhibits several attractive fundamental characteristics, including:

• Strong track record of outperformance.
• Experienced management team.
• Diversified portfolio of high-quality securities.
• Low expense ratio.
• High liquidity.

However, investors should be mindful of the risks associated with fixed income investments, particularly interest rate risk and credit risk.

Resources and Disclaimers:

• First Trust RBA Quality Income website: https://www.ftportfolios.com/web/etfs/solutions/rba-fund
• Bloomberg Terminal: RBA US Equity
• Yahoo Finance: https://finance.yahoo.com/quote/RBA/
• Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.