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Rating:First Trust Unveils a Tactical ETF Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, October 21, 2013

First Trust Unveils a Tactical ETF

Reported by Tommy Fernandez

First Trust [profile] will launch the First Trust Global Tactical Commodity Strategy Fund, an actively managed exchange-traded fund (“ETF”). The launch is expected to take place on October 23, 2013.

The fund will seek to provide total return by providing investors with commodity exposure while seeking a relatively stable risk profile by investing up to 25 percent of its total assets in commodity futures contracts and exchange-traded commodity linked instruments through a wholly-owned subsidiary of the fund.

The remainder of the fund’s assets will primarily be invested in short term investment grade fixed income securities, money market instruments, ETFs and other investment companies and cash and other cash equivalents. The fund’s shares will list and trade on The NASDAQ Stock Market, under the ticker symbol FTGC.

The launch follows the unveiling in August of First Trust's first alt ETF, a managed-futures strategy fund.

Here is the press release:
Company Press Release

FIRST TRUST ANNOUNCES LAUNCH OF FIRST TRUST GLOBAL TACTICAL COMMODITY STRATEGY FUND



First Trust Advisors L.P. (“First Trust”) announced today that the launch of First Trust Global Tactical Commodity Strategy Fund, an actively managed exchange-traded fund (“ETF”), is expected to occur on October 23, 2013. First Trust Global Tactical Commodity Strategy Fund will seek to provide total return by providing investors with commodity exposure while seeking a relatively stable risk profile by investing up to 25% of its total assets in commodity futures contracts and exchange-traded commodity linked instruments (collectively, “Commodities Instruments”) through a wholly-owned subsidiary of the fund. The remainder of the fund’s assets will primarily be invested in short term investment grade fixed income securities, money market instruments, ETFs and other investment companies and cash and other cash equivalents. The fund’s shares will list and trade on The NASDAQ Stock Market, under the ticker symbol FTGC.

  The fund provides a cost-effective way to invest in commodity futures in addition to offering daily liquidity and full transparency to holdings and pricing. ETFs that invest in commodity futures contracts typically generate a form K-1 for tax reporting. However, FTGC will report taxable gains and losses on a Form 1099 and avoid the potential complications of K-1 reporting.

  A key attribute to investing in commodities is their historically low correlation to traditional asset classes such as stocks and bonds. Combining uncorrelated asset classes in an overall portfolio—that is, those that have performed differently over varying market conditions—increases diversification and may potentially smooth out volatility. Of course, diversification does not guarantee a profit or protect against loss. Commodities may also be appealing to investors who are seeking a potential inflation hedge because commodities prices usually rise when inflation is rising. Commodities are “real assets” and have historically had a higher positive correlation with inflation than “financial assets” such as stocks and bonds.

  Because commodities can be volatile, investment weightings of the underlying Commodities Instruments will be actively managed and rebalanced in an attempt to stabilize risk levels. “Commodity investments have traditionally provided investors with attractive total returns and strong diversification characteristics, especially during periods of high inflation,” said Rob Guttschow, CFA and Senior Portfolio Manager of the fund. “By tactically rotating between different commodity investments and managing the overall portfolio volatility, the fund may provide investors commodity exposure in a more attractive manner. Additionally, by attempting to pick the most attractive maturity futures contract for each commodity, FTGC may provide higher returns over a market cycle.”

  Along with Rob Guttschow, John Gambla, CFA, FRM, PRM, will also serve as Senior Portfolio Manager of the fund. 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.

  About First Trust

First Trust, 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 $76 billion as of September 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. First Trust, the investment adviser of the fund, is registered as a commodity pool operator and commodity trading advisor and is also a member of the National Futures Association.

  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.

  ETF Characteristics

  The fund will list and principally trade its shares on The NASDAQ Stock Market LLC.

  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.

  RISKS

  There can be no assurance that the fund’s investment objective will be achieved. The fund’s shares will change in value and you could lose money by investing in the fund. The fund is subject to 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. There is no guarantee that any leveraging strategy the fund employs will be successful.

  The value of commodities and commodity-linked instruments typically is based upon the price movements of a physical commodity or an economic variable linked to such price movements. The prices of commodities and commodities-linked instruments may fluctuate quickly and dramatically and may not correlate to price movements in other asset classes. An active trading market may not exist for certain commodities. Each of these factors and events could have a significant negative impact on the fund. All futures and futures-related products are highly volatile. Price movements are influenced by a variety of factors. The value of commodities, commodity-linked instruments, futures and futures-related products may be affected by changes in overall economic conditions, changes in interest rates, or factors affecting a particular commodity or industry, such as production, supply, demand, drought, floods, weather, political, economic and regulatory developments.

  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.

  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 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.

  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, through the subsidiary, will engage in trading on commodity markets outside the United States. Trading on such markets is not regulated by any United States government agency and may involve certain risks not applicable to trading on United States exchanges. 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 may be subject to the forces of the “whipsaw” markets (as opposed to choppy or stable markets), in which significant price movements develop but then repeatedly reverse, which could cause substantial losses to the fund.

  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.
     

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