First Trust SSI Strategic Convertible Securities ETF (FCVT)

ETF First Trust SSI Strategic Convertible Securities ETF (FCAL)

Profile

FCAL is an actively managed ETF that invests in convertible securities of US companies. It aims for a diversified portfolio across various industries, market capitalizations, and credit qualities. The fund utilizes a quantitative model to select convertible securities with attractive risk-reward profiles.

Objective

The primary objective of FCAL is to generate high total returns, consisting of capital appreciation and current income, through investing in convertible securities.

Issuer

First Trust Advisors L.P. is the issuer of FCAL. First Trust is a reputable asset management firm with over $200 billion in assets under management. They are known for their expertise in alternative investments and thematic ETFs.

Reputation and Reliability: First Trust has a strong reputation in the industry and is considered a reliable issuer.

Management: The portfolio management team at First Trust has extensive experience in managing convertible securities and fixed income investments.

Market Share & Total Net Assets

FCAL has a market share of approximately 2% in the convertible securities ETF space. As of November 2023, the total net assets of the fund are around $1.5 billion.

Moat

FCAL's competitive advantage lies in its active management approach and quantitative model. The model identifies undervalued convertible securities with the potential for strong returns. Additionally, the active management allows for flexibility in adjusting the portfolio based on market conditions.

Financial Performance

Historical Performance: FCAL has delivered strong historical returns, outperforming its benchmark index, the ICE Convertible Bond Index, over various time periods.

Benchmark Comparison: The fund has consistently outperformed its benchmark, demonstrating the effectiveness of its active management strategy.

Growth Trajectory

The convertible securities market is expected to grow in the future, driven by factors such as low-interest-rate environment and increasing demand for income-generating investments. FCAL is well-positioned to benefit from this growth.

Liquidity

Average Trading Volume: FCAL has a healthy average daily trading volume, ensuring easy buying and selling of shares.

Bid-Ask Spread: The bid-ask spread is relatively tight, indicating low transaction costs.

Market Dynamics

Economic indicators, interest rate movements, and investor sentiment towards convertible securities impact the market environment for FCAL.

Competitors

Key competitors include the iShares Convertible Bond ETF (ICVT) and the VanEck Convertible Securities ETF (CWB). ICVT has a market share of around 8%, while CWB holds approximately 5%.

Expense Ratio

The expense ratio for FCAL is 0.75%, which is slightly higher than some of its competitors.

Investment Approach & Strategy

Strategy: FCAL actively manages its portfolio to invest in convertible securities with attractive risk-reward profiles.

Composition: The fund primarily invests in convertible bonds but may also hold other convertible securities like preferred stocks.

Key Points

• Actively managed ETF focused on convertible securities.
• Strong historical performance and track record.
• Well-positioned to benefit from the growth of the convertible securities market.
• Healthy liquidity and competitive expense ratio.

Risks

• Volatility: Convertible securities can be more volatile than traditional bonds.
• Market risk: The value of convertible securities can be affected by various market factors.
• Credit risk: The issuer of the convertible security may default on its obligations.

Who Should Consider Investing

FCAL is suitable for investors seeking high total returns with a focus on income generation. It is also appropriate for investors comfortable with moderate volatility and market risk.

Fundamental Rating Based on AI

Rating: 8/10

• Strengths: Strong track record, active management, and focus on undervalued securities.
• Weaknesses: Higher expense ratio compared to some competitors.
• Future Prospects: Positive outlook due to the growing demand for convertible securities.

Justification: FCAL demonstrates a strong fundamental profile with a solid track record, experienced management, and a differentiated investment approach. While the expense ratio is slightly higher, the potential for high returns and growth outweighs this disadvantage.

Resources & Disclaimers

• First Trust website: https://www.ftportfolios.com/content/etfs/fcal
• Morningstar: https://www.morningstar.com/etfs/arcx/fcal/portfolio
• ETF.com: https://www.etf.com/FCAL

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.