First Trust, the Wheaton, Ill.-based fund firm behind the First
Trust Dow Jones Internet Fund (NYSEArca:FDN), today rolled out two
income-focused ETFs-one a multi-asset-class income fund and the
other a dividend-focused tech fund.
Both the First Trust Multi-Asset Diversified Income Index Fund
(NasdaqGM:MDIV) and the First Trust Nasdaq Technology Dividend
Index Fund (NasdaqGM:TDIV) cater to investor demand for income in
an environment of low interest rates.
First Trust is joining other fund providers-such as iShares and
State Street Global Advisors, to name a few-that have rushed to
meet that demand through passive and active strategies.
MDIV tracks a Nasdaq index that dilutes single-class risk by
diversifying across several asset classes while screening for
volatility to limit exposure to high yields that are associated
with poor price performance. The fund looks to generate lower-risk
TDIV, on the other hand, targets dividend-paying technology and
telecommunications company stock in a portfolio that costs 0.50
percent a year. MDIV comes with a 0.68 percent price tag.
"With interest rates at historically low levels, income
investors have been seeking yield from alternative sources,
including multi-asset income investing," First Trust Chief Market
Strategist Robert Carey said in a press release.
MDIV will own domestic and international dividend-paying stocks,
real estate investment trusts, preferred securities, master limited
partnerships and high-yield corporate bond ETFs in a portfolio
that's split five ways. Dividend-paying stocks represent 25 percent
of the mix, while junk corporate debt snags 15 percent, and the
remaining three classes each carries a 20 percent weighting in the
mix, the company said.
"Limiting volatility is fundamental to multi-asset investing,"
the company said on its website. "Yield is the main driver behind
the index; however, in an effort to ensure consistent high yields
without the negative drag due to inconsistent security price
performance, a maximum volatility cap is used."
The fund would join others in the space such as the actively
managed SPDR SSgA Income Allocation ETF (NYSEArca:INKM) and the
passive iShares Morningstar Multi-Asset Income Index Fund
"Every asset class has its own set of eligibility criteria, and
every security in the index is U.S.-listed and meets stringent
eligibility criteria based on liquidity, size, volatility and
yield," the company said in the release.
The portfolio is rebalanced quarterly.
Technology Sector Promises Hefty Dividends
TDIV also tracks a Nasdaq index and invests in technology or
telecommunications companies in a mix that gives a collective
weight of 80 percent to tech stocks and 20 percent to
telecommunications stocks, the company said.
The portfolio, which is rebalanced quarterly, also caps
single-stock exposure to limit risk.
The company said in its most recent prospectus that the
"modified dividend value-weighting" index methodology is designed
to cherry-pick those securities with the most attractive
"Given that Internet usage and demand for products such as
mobile phones, semiconductors and computer devices are growing
rapidly, and the technology industry's dividend growth rate has
outpaced all other sectors over the past seven years, we believe
this is an ideal time to invest in the technology field," First
Trust's ETF Strategist Ryan Issakainen said in the release.
"According to Moody's, it is projected that technology firms
will pay out $26 billion in dividends in 2012," he added.
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