The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  First Trust High Income Strat Foc ETF to a Morningstar Medalist Rating of Neutral.  The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy merits a Below Average Process Pillar rating. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

First Trust TCW Opportunistic Fixed Income ETF

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Morningstar's evaluation of this fund's process seeks to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. First Trust High Income Strat Foc ETF earns a Below Average Process Pillar rating. The process is strengthened by the scale of its portfolio management team. With five portfolio managers at the helm, the fund is well-staffed. However, the rating is held back by the fund's mediocre long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's disappointing risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.8 stars, also detracts from the process. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

The investment strategy as stated in the fund's prospectus is as follows: 


The investment seeks risk-adjusted income; capital appreciation is the secondary objective.  Under normal market conditions, the fund seeks to achieve its investment objectives by investing in a portfolio of U.S.-listed ETFs that is designed to follow the High Income Model developed by the advisor. The fund, through its investments in the underlying ETFs comprising the High Income Model, and seeks to provide investors with a diversified income stream by holding a blend of fixed income assets that are actively managed to seek levels of high income and total return. It invests significantly in shares of the First Trust TCW Opportunistic Fixed Income ETF. 

 

 For the strategy's fixed-income sleeve, credit and interest rate risk are similar to the typical category peer. Its average credit rating is BB and its average duration of 5.2 years, both of which mirror the category.

Below Average

Process

First Trust High Income Strat Foc ETF earns an Average People Pillar rating. Daniel J. Lindquist, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience.  Daniel J. Lindquist is supported by an experienced team, being able to draw on four additional listed managers, who average 20 years of listed portfolio management experience. As a team, they manage two investment vehicles together, with a Negative asset-weighted algorithmically-assigned average Morningstar Medalist Rating. This indicates that the team falls short and is expected to produce negative alpha in aggregate. Management has provided stability, leading to a potential smooth transition of power, with similar manager retention to peers. The most recent documented departure was within the past two years.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

First Trust meets the industry standard for stewardship, but it could do more to align itself with investors. It earns an Average Parent rating.

This is a team-oriented organization that eschews star managers. While exchange-traded funds represent the bulk of the firm's assets, First Trust bypasses the competitive market for low-cost beta funds, instead opting for complex strategies with higher management fees. However, the firm's focus on ETFs for future product development underpins its commitment to tax efficiency and transparency. Some of its thematic strategies appear trendy, but it stands behind them and rarely liquidates funds. 

The firm is a private partnership, controlled by Jim Bowen, the CEO. Many senior managers are limited partners. This ownership structure helps the firm stay focused on the long term and promotes retention, which has been strong for the investment team. The firm has grown considerably over the past decade and is among the largest providers of actively managed ETFs, as well as unit investment trusts. As it has grown, the firm has expanded its investment team and beefed up its technology infrastructure.

First Trust's focus is on educating advisors and providing them solutions. This may benefit investors indirectly, but First Trust could do more to directly align with investors by cutting fees and limiting trendy strategies.

Parent

First Trust Strategic Income Fund

HISF uses a fund-of-funds structure to primarily seek income across a broad range of fixed income securities of US and non-US issuers.

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WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. ("FTA") announces the declaration of the monthly distributions for certain exchange-traded funds advised by FTA. The following dates apply to today's distribution declarations: Expected Ex-Dividend Date: April 23, 2024 Record Date: April 24, 2024 Payable Date: April 30, 2024 Ticker   Exchange   Fund Name   Frequency   Ordinary Income Per Share Amount   ACTIVELY MANAGED EXCHANGE-TRADED FUNDS   First Trust Exchange-Traded Fund III FCAL   N.

First Trust Advisors L.P. Announces Distributions for Exchange-Traded Funds

News for First Trust Strategic Income Fund ETF (HISF)