The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  First Trust Ltd Drtn Inv Grd Corp 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 receives a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in corporate bonds and an underweight in AAA rated bonds compared with category peers. 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

Morningstar's style-agnostic investment process evaluation looks for strategies that should be able to outperform their Morningstar Category index on a risk-adjusted basis over time. First Trust Ltd Drtn Inv Grd Corp ETF earns a Below Average Process Pillar rating.    The process benefits from the size of its portfolio management team. With six portfolio managers at the helm, the fund is well-staffed. However, the rating is held back by the parent firm's five-year risk-adjusted success ratio of 29%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's subpar risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.7 stars, also holds the process back. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 Compared with other funds in the Short-Term Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the category average, the managers have been substantially overweight corporate bonds in recent years. In the latest month, the strategy has relatively overweighted corporate debt compared with its peers as well. Additionally, there's been a notable underallocation from AAA rated bonds over the past few years. Similarly, in recent months, the strategy also had less exposure to AAA rated bonds than peers. Finally, during the past few years, the fund leaned meaningfully away from debt with 20- to 30-year maturities. In recent months, the strategy also had less exposure to debt with 20- to 30-year maturities compared to its peers.

 This strategy has a 4.6% 12-month yield, higher than its average peer's 3.7%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 4.7%. Typically, higher yields come at the cost of higher credit risk. The portfolio has a lower average surveyed credit quality of BBB, compared with the category average's A and its non-investment-grade stake is 2% of assets, similar to its average peer. Strategies that take on more credit risk tend to be at their best when markets are as well. This risk contributes to strong performance during bull markets at the cost of losing more on the downside.

Below Average

Process

First Trust Ltd Drtn Inv Grd Corp ETF earns an Average People Pillar rating. The team is backed by Todd W. Larson, the longest-tenured manager on the strategy, who brings 24 years of listed portfolio management experience.  The team is composed of a solid supporting cast of five additional named managers, averaging 16 years of listed portfolio management experience.  The highest personal investment in the fund by any of its managers is between $100,000 and $500,000. That's on the low side--it would need to be more than $1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors. 

 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 Limited Duration Investment Grade Corporate ETF

FSIG seeks to provide current income from an actively managed portfolio of short-term US investment-grade corporate bonds.

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This trend is poised to continue this year.

Actively Managed ETFs Claim Outsized Portion of 2023 Inflows

WHEATON, Ill.--(BUSINESS WIRE)--First Trust Advisors L.P. ("FTA") announces the declaration of the monthly distribution for First Trust Limited Duration Investment Grade Corporate ETF, a series of First Trust Exchange-Traded Fund IV. The following dates apply to today's distribution declarations: Expected Ex-Dividend Date:   December 23, 2021 Record Date:   December 27, 2021 Payable Date:   December 31, 2021 Ticker   Exchange   Fund Name   Frequency   Ordinary Income Per Share Amount   ACTIVELY

First Trust Advisors L.P. Announces Distribution for First Trust Limited Duration Investment Grade Corporate ETF

First Trust has announced the release of their newest ETF that invests in corporate bonds with limited duration in a press release. The First Trust Limited Duration Investment Grade Corporate ETF (FSIG) seeks to provide current income in investment-grade bonds while maintaining a portfolio with a weighted average duration within one year of the U.S. [.

First Trust Launches New Limited Duration Bond ETF, ‘FSIG'

WHEATON, Ill--(BUSINESS WIRE)--First Trust Advisors L.P. (“First Trust”) a leading exchange-traded fund (“ETF”) provider and asset manager, announced today that it has launched the First Trust Limited Duration Investment Grade Corporate ETF (NYSE Arca: FSIG) (“the fund”). FSIG seeks to deliver current income by investing at least 80% of its net assets (plus any borrowings for investment purposes) in investment grade corporate debt securities.* In addition, the fund has a limited duration portfo

News for First Trust Limited Duration Investment Grade Corporate ETF ETF (FSIG)