First Trust to Launch First Trust Morningstar Managed Futures Strategy Fund
First Trust to Launch First Trust Morningstar Managed Futures Strategy Fund
An actively managed ETF that provides an alternative approach to managed futures investing.
WHEATON, Ill.--(BUSINESS WIRE)-- First Trust Advisors L.P. ("First Trust"), known for its more than 200 investment products that offer transparency and tax efficiency, expects to launch a new actively managed exchange-traded fund ("ETF") on August 2, 2013. The First Trust Morningstar Managed Futures Strategy Fund (NYSE Arca: FMF) (the "fund")is an actively managed ETF that seeks to provide investors with positive returns as its investment objective. The First Trust investment team has the flexibility to manage the contract selection to seek to exceed the performance of the Morningstar® Diversified Futures IndexSM (the "benchmark"). The benchmark currently contains 34 different futures positions consisting of 19 commodities, 9 equity indexes, and 6 currencies.
Managed futures are an alternative asset class that may benefit from both rising and falling price trends. Managed futures have been successfully implemented by institutional investors for nearly three decades, but have been typically offered in hedge funds or private accounts until recently. Exchanged-traded funds like FMF make these strategies available to all investors. "Managed futures strategies have historically had low correlation to stocks, bonds, and other investment strategies, moderate volatility, lower drawdowns than equities and positive returns in a variety of economic environments," said John Gambla, CFA and Senior Portfolio Manager of the fund. "Consequently, managed futures can be a potentially powerful diversifier to an investment portfolio." However, alternative investments may employ complex strategies and have unique investment and risk characteristics. It is important to note that diversification does not guarantee profit or protect against loss and the fund itself is non-diversified.
The fund provides exposure, through a wholly-owned Cayman Islands subsidiary, to commodities, currencies, and equities through a long, short or flat futures strategy. The fund seeks to achieve positive returns that are not directly correlated to broad market equity or fixed income returns. "We are excited that First Trust licensed our diversified futures index for an exchange-traded fund," said Sanjay Arya, senior vice president of Morningstar Indexes. "Since launching our first futures-based indexes in 2007, we have seen growing investor demand for liquid, transparent, rules-based strategies. Designed to take both long and short positions, the Morningstar Diversified Futures Index provides the flexibility to potentially capture both upward and downward movements in price."
There are two basic futures positions—"long" and "short." The long position holds or agrees to buy a specific quantity of a an asset when the contract expires for a price set at the time of the contract and stands to profit if the underlying asset price goes up. The short position agrees to sell a specific quantity of an asset when the contract expires for a price set at the time of the contract and stands to profit as long as the underlying asset price goes down. The fund will lose value if the security or instrument that is the subject of a short sale increases in value. Additionally, short selling creates special risks which could result in increased volatility of returns and may result in greater gains or greater losses. Conversely, the fund will be adversely affected if it holds a long position in a security that decreases in value.
In addition to Mr. Gambla, Rob A. Guttschow, CFA, will also serve as Senior Portfolio Manager. The two will primarily be responsible for daily investment decisions under the direction of an Investment Committee which includes six other individuals with extensive investment experience. The ETF structure makes the strategy more accessible to investors, providing a cost-effective way to invest in managed futures in addition to offering daily liquidity and full transparency to holdings and pricing.
For more information about First Trust, please contact Chris Moon of JCPR at 973-850-7304 or firstname.lastname@example.org.
About First Trust
First Trust Advisors L.P., along with its affiliate First Trust Portfolios L.P., are privately-held companies which provide a variety of investment services, including asset management and financial advisory services, with collective assets under management or supervision of approximately $70 billion as of June 30, 2013 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts. First Trust is based in Wheaton, Illinois. For more information, visit http://www.ftportfolios.com.
You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. Contact First Trust Portfolios L.P. at 1-800-621-1675 to obtain a prospectus or summary prospectus which contains this and other information about the fund. The prospectus or summary prospectus should be read carefully before investing.
The fund will list and principally trade its shares on the NYSE Arca, Inc.
The fund may not be fully invested at times. Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Market prices may differ to some degree from the net asset value of the shares. Investors who sell fund shares may receive less than the share's net asset value. Shares may be sold throughout the day on the exchange through any brokerage account. However, unlike mutual funds, shares may only be redeemed directly from the fund by authorized participants, in very large creation/redemption units.
The fund's shares will change in value, and you could lose money by investing in the fund. One of the principal risks of investing in the fund is market risk. The trading prices of commodities futures, fixed income securities and other instruments fluctuate in response to a variety of factors. The fund's net asset value and market price may fluctuate significantly in response to these factors. As a result, an investor could lose money over short or long periods of time. In addition, the net asset value of the fund over short-term periods may be more volatile than other investment options because of the fund's significant use of financial instruments that have a leveraging effect.
The fund is not obligated to invest in the same instruments included in the benchmark and may invest in certain other securities. There can be no assurance that the fund's performance will exceed the performance of the benchmark.
The fund will not invest directly in futures instruments. Rather, it will invest in a wholly-owned subsidiary, which will have the same investment objective as the fund, but unlike the fund, it may invest without limitation in futures instruments. The subsidiary is not registered under the 1940 Act and is not subject to all the investor protections of the 1940 Act. Thus, the fund, as an investor in the subsidiary, will not have all the protections offered to investors in registered investment companies.
All futures and futures-related products are highly volatile. Futures instruments may be less liquid than other types of investments. The prices of futures instruments may fluctuate quickly and dramatically and may not correlate to price movements in other asset classes.
The fund's strategy may frequently involve buying and selling portfolio securities to rebalance the fund's exposure to various market sectors. Higher portfolio turnover may result in the fund paying higher levels of transaction costs and generating greater tax liabilities for shareholders.
The benchmark and the fund will take both long and short positions and should not be used as proxies for taking long-only positions. The fund may also be flat on some positions. The fund will lose value if a security or instrument that is the subject of a short sale increases in value. Short sales involve the risk that losses may be exaggerated, potentially losing more money than the actual cost of the investment.
The fund currently intends to effect most creations and redemptions in whole or in part for cash, rather than in-kind securities. As a result, the fund may be less tax-efficient than if it were to sell and redeem its shares principally in-kind.
The fund holds investments that are denominated in non-U.S. currencies, or in securities that provide exposure to such currencies, currency exchange rates or interest rates denominated in such currencies. Changes in currency exchange rates and the relative value of non-U.S. currencies may affect the value of the fund's investments and the value of the fund's shares. Commodity futures contracts traded on non-U.S. exchanges or with non-U.S. counterparties present risks because they may not be subject to the same degree of regulation as their U.S. counterparts.
The fund is subject to additional risks including counterparty risk, credit risk, gap risk, interest rate risk, issuer specific risk, regulatory risk and repurchase agreement risk. The fund may be subject to additional risks pertaining to currency, interest rates and derivatives.
The fund is classified as "non-diversified." A non-diversified fund generally may invest a larger percentage of its assets in the securities of a smaller number of issuers. As a result, the fund may be more susceptible to the risks associated with these particular companies, or to a single economic, political or regulatory occurrence affecting these companies.
The fund is subject to management risk because it is an actively managed portfolio. The advisor will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that the fund will meet its investment objective.
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