The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  First Trust Low Dur Strat Foc ETF to a Morningstar Medalist Rating of Negative.  Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-costliest quintile among peers.  

 The strategy earns 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

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Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. First Trust Low Dur Strat Foc ETF earns a Below Average Process Pillar rating.    The process is bolstered by the size 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 parent firm's five-year risk-adjusted success ratio of 29%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's inferior 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 takes on significantly higher credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer over the past few years. Moreover, it has no significant biases in terms of credit quality, bond sectors, or maturity when compared to its category peers in recent years.   

 This strategy's 12-month yield is 4.2%, higher than its average peer's 3.7%. It also has a 4.3% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, higher yields come at the cost of higher credit risk. The portfolio has a lower average credit rating of BBB, compared with the typical peers' A. 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 Low Dur Strat Foc ETF earns an Average People Pillar rating. Daniel J. Lindquist, the longest-tenured manager on the strategy, provides strong guidance, bringing forward 24 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.5 stars, demonstrating underwhelming risk-adjusted performance. 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 disappointing prospects. Across the strategies they manage, there is an asset-weighted average Morningstar Medalist Rating of Negative. This indicates the team is projected to generate negative alpha in aggregate. 

 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

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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

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