New Multi-Asset ETF From First Trust Debuts
Amid the yield hunt brought on by the Federal Reserve's near-zero interest rate and loose monetary policies, multi-asset income ETFs have soared in popularity and number of available funds.
The First Trust International Multi-Asset Diversified Income Index Fund (NASDAQ: YDIV), which debuted Friday, is the newest member of the group.
YDIV is the international answer to the First Trust Multi-Asset Diversified Income Index Fund (NASDAQ: MDIV). MDIV is just over a year old and has $486.1 million in assets under management. YDIV is linked to the NASDAQ International Multi-Asset Diversified Income Index.
"The Fund provides international exposure to a diversified mix of asset classes in a single investment portfolio that
has built-in volatility screens. Yield is the main driver behind the index; however, within each asset class a maximum volatility cap is used that seeks to limit securities that have high yields strictly due to poor price performance. The portfolio is further diversified within each asset class. As a result, the Fund provides the potential for a lower-risk total return alternative to investing solely in one asset class, said First Trust in a statement.
MDIV invests in common stocks and/or depositary receipts (25%), real estate investment trusts (“REITs”) (20%), preferred securities (20%), master limited partnerships (“MLPs”) (20%) and an exchange-traded fund (15%), according to Illinois-based First Trust.
YDIV will also invest in dividend stocks, non-U.S. infrastructure firms and a non-U.S. junk bond ETF. Dividend equities represent 25 percent of the index while REITs, infrastructure companies and preferred stocks each have allocations of 20 percent with a high-yield bond ETF getting a weight of 15 percent.
"The Fund will seek to deliver a relatively high level of income for investors, while also providing diversification benefits to traditional fixed income portfolios," said Ryan Issakainen, Senior Vice President and ETF Strategist at First Trust, in the statement. "This diversified approach, with built-in rebalancing, may also help income-seeking investors maintain discipline during periods of volatility."
MDIV, the domestic multi-asset product, has a 30-day SEC yield of 6.48 percent. Other popular multi-asset income ETFs include the Guggenheim Multi-Asset Income ETF (NYSE: CVY), the iShares Morningstar Multi-Asset Income ETF (NYSE: IYLD) and the SPDR SSgA Income Allocation ETF (NYSE: INKM).
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Disclosure: Author is long MDIV.
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