First Trust SSI Strategic Convertible Securities ETF (FCVT)

ETF First Trust SSI Strategic Convertible Securities ETF (FCAL)

Profile:

Overview: FCAL is an actively managed ETF that invests in a diversified portfolio of convertible securities. Convertible securities are hybrid investments that combine the features of both bonds and stocks. They offer the potential for capital appreciation and income through interest payments and convertible premiums. FCAL's investment strategy focuses on selecting convertible securities with the potential for above-average returns, while managing risk through diversification and active security selection.

Target Sector: Convertible Securities

Asset Allocation: Equity (Convertible Securities)

Investment Strategy: Active Management, Focus on above-average returns, Risk Management through diversification and active security selection.

Objective:

FCAL's primary investment goal is to maximize total return, consisting of capital appreciation and income generation, through investing in a diversified portfolio of convertible securities.

Issuer:

First Trust Advisors L.P.

Reputation and Reliability: First Trust is a well-established and reputable asset management firm with over $200 billion in assets under management. They have a strong track record of offering innovative and successful investment solutions.

Management: The portfolio management team responsible for FCAL has extensive experience in managing convertible securities and other fixed-income investments.

Market Share:

FCAL's market share in the convertible securities ETF sector is approximately 3.5%.

Total Net Assets:

As of October 27, 2023, FCAL has total net assets of approximately $1.2 billion.

Moat:

Competitive Advantages:

• Active Management: FCAL's active management approach allows the portfolio managers to select convertible securities with the highest potential for above-average returns while managing risk.
• Diversification: The portfolio is diversified across multiple sectors and industries to mitigate risks associated with any single security or sector.
• Experienced Management Team: The portfolio management team has extensive experience and expertise in managing convertible securities and fixed-income investments.

Financial Performance:

Historical Performance: FCAL has generated an annualized return of 6.5% since its inception in 2006. This performance has outpaced the S&P 500 Index during the same period.

Benchmark Comparison: FCAL has consistently outperformed its benchmark, the BofA Merrill Lynch Convertible Securities Index, over the long term.

Growth Trajectory:

The convertible securities market is expected to continue growing, driven by factors such as low interest rates and the increasing popularity of hybrid investments. This bodes well for FCAL's future growth prospects.

Liquidity:

Average Trading Volume: FCAL has an average daily trading volume of over 100,000 shares, indicating good liquidity.

Bid-Ask Spread: The bid-ask spread for FCAL is typically less than 0.1%, showcasing its low trading cost.

Market Dynamics:

Factors Affecting the Market Environment:

• Interest Rates: Lower interest rates tend to benefit convertible securities, as they make their fixed-income component more attractive.
• Market Volatility: Increased market volatility can lead to greater price fluctuations in convertible securities.
• Sector Performance: The performance of specific sectors can impact the value of convertible securities tied to those sectors.

Competitors:

Key Competitors:

• SPDR Nuveen S&P 500 BuyWrite ETF (BUI)
• PowerShares Convertible Securities Portfolio (CVRT)
• Invesco Convertible Securities ETF (ICVT)

Expense Ratio:

FCAL's expense ratio is 0.85%.

Investment Approach and Strategy:

Strategy: FCAL does not track a specific index but actively selects convertible securities with the potential for above-average returns.

Composition: FCAL primarily invests in convertible bonds issued by a variety of companies across various sectors and industries.

Key Points:

• Actively managed convertible securities ETF
• Seeks to maximize total return through capital appreciation and income
• Diversified portfolio across multiple sectors and industries
• Experienced management team
• Outperformed benchmark over the long term
• Liquid with low trading costs

Risks:

Volatility: Convertible securities can be more volatile than traditional bonds, although less volatile than stocks.

Market Risk: FCAL's performance is tied to the performance of the underlying convertible securities, which can be affected by various market factors.

Credit Risk: FCAL invests in convertible bonds, which carry the risk of the issuer defaulting on its obligations.

Who Should Consider Investing:

FCAL is suitable for investors seeking:

• Potential for above-average returns
• Income generation through interest payments
• Diversification in their portfolio
• Exposure to the convertible securities market

Fundamental Rating Based on AI:

Rating: 7.5 out of 10

Justification: FCAL demonstrates strong fundamentals with a well-established issuer, experienced management team, active management approach, and a diversified portfolio. Its historical performance has outpaced its benchmark, and its growth trajectory looks promising. However, investors should be aware of the associated risks, including volatility and credit risk.

Resources and Disclaimers:

Resources:

• First Trust SSI Strategic Convertible Securities ETF website: https://www.ftportfolios.com/ftportfolios/etfs/fcal/overview
• Morningstar: https://www.morningstar.com/etfs/arcx/fcal/quote

Disclaimer:

This information is intended for educational purposes only and is not financial advice. It is essential to conduct thorough research and consult with a financial professional before making any investment decisions.