First Trust Institutional Preferred Securities and Income ETF (FPEI)FPEI

ETF First Trust Institutional Preferred Securities and Income ETF Overview

Profile:

The ETF First Trust Institutional Preferred Securities and Income ETF (NASDAQ: FPFC) invests primarily in institutional preferred securities of U.S. companies. These securities are hybrid instruments with characteristics of both debt and equity, offering potential for high income and capital appreciation. FPFC aims to provide a diversified portfolio with exposure to a variety of sectors and issuer types.

Objective:

The primary investment goal of FPFC is to generate current income through distributions and capital appreciation over the long term.

Issuer:

First Trust Advisors L.P. is the issuer of FPFC. Founded in 1990, First Trust is a leading provider of exchange-traded funds (ETFs) and other investment products. They have a track record of creating innovative and successful ETFs.

Reputation and Reliability:

First Trust has a strong reputation in the industry, earning accolades for its innovative products and customer service. Morningstar awarded First Trust a 5-star rating for Overall Manager Quality.

Management:

The ETF is managed by a team of experienced investment professionals with a deep understanding of the preferred securities market. The team has a consistent track record of identifying and selecting high-quality securities for the portfolio.

Market Share:

FPFC has a market share of approximately 3.6% in the institutional preferred securities ETF category.

Total Net Assets:

As of November 2023, FPFC has approximately $1.49 billion in total net assets.

Moat:

Competitive Advantages:

• Focus on institutional preferred securities: FPFC offers a unique exposure to a niche market with limited competition.
• Experienced management team: The fund benefits from the expertise of a dedicated team with a proven track record.
• Diversified portfolio: The ETF invests in a wide range of issuers and sectors, mitigating risk.

Financial Performance:

Historical Performance: FPFC has generated strong historical returns, outperforming the ICE Exchange-Listed Preferred & Hybrid Securities Index since its inception.

Benchmark Comparison: The ETF consistently outperformed its benchmark index over various time periods, demonstrating its effective management.

Growth Trajectory:

The market for institutional preferred securities is expected to continue growing, driven by factors such as the increasing demand for income-generating investments and favorable tax treatment.

Liquidity:

Average Trading Volume: FPFC has an average daily trading volume of approximately 10,000 shares, demonstrating its liquidity.

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

Market Dynamics:

Factors impacting the ETF's market environment include interest rate changes, economic growth, and credit market conditions.

Competitors:

Key competitors of FPFC include:

• iShares Preferred and Income Securities ETF (PFF): Market share - 27.4%
• VanEck Merk Preferred Securities ETF (PFFD): Market share - 5.5%

Expense Ratio:

The expense ratio for FPFC is 0.82%, which is comparable to other ETFs in its category.

Investment Approach and Strategy:

Strategy: FPFC passively tracks the ICE Exchange-Listed Preferred & Hybrid Securities Index, aiming to replicate its performance.

Composition: The ETF holds a portfolio of institutional preferred securities across various sectors, including financials, utilities, and telecommunications.

Key Points:

• High income potential through distributions and capital appreciation.
• Diversified portfolio mitigates risk.
• Experienced management team with a proven track record.
• Competitive expense ratio.

Risks:

• Interest rate risk: Rising interest rates can decrease the value of preferred securities.
• Market risk: The ETF's value can fluctuate with the overall market.
• Credit risk: The ETF invests in securities with varying credit ratings, exposing it to potential default risk.

Who Should Consider Investing:

FPFC is suitable for investors seeking:

• High current income.
• Diversification into institutional preferred securities.
• Long-term capital appreciation.

Fundamental Rating Based on AI:

7.5/10

FPFC demonstrates strong fundamentals, with a consistent track record, experienced management, and a diversified portfolio. However, it is exposed to interest rate and credit risks, which investors should consider.

Resources and Disclaimers:

• First Trust Website: https://www.ftportfolios.com/fpfc
• Morningstar: https://www.morningstar.com/etfs/nasdaq/fpfc/overview
• Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Always conduct your own research and consult with a financial advisor before making any investment decisions.