First Trust Exchange-Traded Fund IV - FT Energy Income Partners Strategy ETF (EIPX)EIPX

ETF First Trust Exchange-Traded Fund IV - FT Energy Income Partners Strategy ETF (FENY)

Profile:

• Primary Focus: Energy partnerships and MLPs, offering high income and tax-advantaged distributions.
• Asset Allocation: Diversified across various energy partnerships and MLPs, aiming to achieve 80% investment in U.S.-based entities.
• Investment Strategy: Passively tracks the Energy Select Sector Index, passively managed by First Trust Portfolios L.P.

Objective:

• To provide high current income to investors through exposure to U.S. energy and energy infrastructure MLP and partnership investments.
• To achieve capital appreciation of the investments.

Issuer:

First Trust Advisors L.P.

• Reputation and Reliability: Reputable investment management firm with a strong track record, established in 1997.
• Management: Experienced team with various expertise in different sectors, including energy MLPs and partnerships.

Market Share:

• FENY holds a 0.62% market share of the US Energy Infrastructure MLP & Partnership ETFs category.

Total Net Assets:

• Approximately $114.85 million as of December 13, 2023.

Moat:

• Focus on High Income: FENY offers a high current distribution yield compared to its peers, attracting income-seeking investors.
• Tax-Advantaged Distributions: FENY distributes a high portion of income from MLPs, which are generally taxed at lower rates compared to dividends from other types of companies.

Financial Performance:

• 3-year average return: -13.17%
• 5-year average return: -2.08%
• Year-to-date return (as of November 19, 2023): -2.65%

Benchmark Comparison:

• Underperformed the Energy Select Sector Index, which saw a 2.07% return year-to-date.

Growth Trajectory:

• The future outlook for energy partnerships and MLPs remains uncertain, potentially limiting future growth in the short term.
• Long-term, the energy sector offers potential for growth, driven by increasing demand and infrastructure development.

Liquidity:

• Average Trading Volume: 4,328 shares per day, indicating moderate liquidity.
• Bid-Ask Spread: 0.10%, indicating low trading costs.

Market Dynamics:

• Oil and Gas Prices: Volatility in energy prices significantly impacts MLPs and partnerships.
• Interest Rate Hikes: Rising interest rates could lead to decreased demand for MLPs and partnerships.
• Economic Growth: Overall economic performance influences energy consumption and subsequently impacts MLPs and partnerships.

Competitors:

• Kayne Anderson Energy Infrastructure Fund (KYN) (0.17% market share)
• Invesco Alerian MLP ETF (AMLP) (4.40% market share)
• Global X MLP ETF (MLPX) (1.74% market share)

Expense Ratio: 1.30%

Investment Approach and Strategy:

• Strategy: Tracks the Energy Select Sector Index, which comprises U.S.-listed MLPs and partnerships.
• Composition: Primarily invests in MLPs and partnerships within the energy sector, including both upstream and midstream businesses.

Key Points:

• FENY offers income-seeking investors access to a diversified portfolio of energy MLPs and partnerships.
• It provides a high current distribution yield compared to similar ETFs.
• FENY benefits from tax-advantaged distributions from MLPs.
• However, the ETF has experienced negative returns and underperformed its benchmark in recent years.
• Future growth depends on the performance of the energy sector and broader market conditions.

Risks:

• Volatility: MLPs and partnerships are subject to high volatility due to factors like energy prices and interest rate fluctuations.
• Market Risk: Performance is heavily influenced by the overall energy sector's performance and broader economic conditions.
• Limited Liquidity: FENY has moderate liquidity compared to other ETFs, potentially impacting the ease and cost of trading.

Who Should Consider Investing:

• Investors seeking high current income with tolerance for high volatility and limited liquidity.
• Investors optimistic about the long-term prospects of the energy sector.
• Investors who can benefit from the tax-advantaged distributions of MLPs.

Fundamental Rating Based on AI: 7/10

Analysis: The AI-based analysis assigns a rating of 7/10 due to FENY's focus on high income, tax-advantaged distributions, and moderate liquidity. However, the recent negative returns, benchmark underperformance, and limited future growth potential limit the overall rating.

Resources and Disclaimers:

• Information gathered from First Trust FENY website, Yahoo Finance, ETF.com, and Morningstar.
• Past performance may not be indicative of future results.
• This analysis is for informational purposes only and should not be considered investment advice.