First
Trust Advisors L.P. (“First Trust”), a leading ETF provider, expects
to launch two new exchange-traded funds (“ETFs”), the First Trust RBA
American Industrial RenaissanceTM ETF (NASDAQ: AIRR) and the
First Trust RBA Quality Income ETF (NASDAQ: QINC). The new funds
are expected to begin trading on The NASDAQ Stock Market on March 11,
2014 and track indexes developed by Richard Bernstein Advisors LLC
(“RBA”). “These two ETFs seek to address investors’ needs for income and
theme-based investing. RBA has long been a proponent of the American
industrial renaissance theme and we think we understand it better than
most,” said Richard Bernstein, RBA’s Chief Executive and Chief
Investment Officer.
The First Trust RBA American Industrial RenaissanceTM
ETF
The First Trust RBA American Industrial RenaissanceTM ETF
seeks investment results that correspond generally to the price and
yield (before the fund’s fees and expenses) of an equity index called
the Richard Bernstein Advisors American Industrial RenaissanceTM
Index. The Index is designed to measure the performance of small and mid
cap U.S. companies in the industrial and community banking sectors. RBA
believes there are increasing reasons to expect that the United States
may regain industrial market share, based on a number of factors,
including: access to cheap energy sources; the relative stability of the
U.S. market compared to many emerging markets; and growing availability
of bank financing for manufacturers. For many decades, American
companies sent their manufacturing work overseas. But today, in a trend
known as “reshoring,” many companies are bringing their manufacturing
back to the United States. A variety of factors are driving the U.S.
manufacturing renaissance including slower growth in hourly compensation
compared to some global competitors and lower natural gas and
electricity prices. These factors are helping the U.S. to have a
competitive advantage over other countries, in our opinion, which we
believe will allow U.S. industrial and manufacturing companies to gain
market share.
“Cost-based incentives for American companies to manufacture goods
overseas have declined dramatically in recent years, particularly for
goods produced for U.S. consumers. Not only can domestic manufacturers
save on shipping costs and tariffs, but the U.S. shale gas boom has
provided a cheap, abundant source of domestic energy,” said Ryan
Issakainen, Senior Vice President and ETF Strategist for First Trust.
“Meanwhile, emerging market labor costs have continued to trend higher,
compared to the relatively stable cost of high quality domestic labor.
Taken together, these factors are contributing to an American industrial
renaissance, and potentially providing significant competitive
advantages for many domestically-oriented manufacturing companies.”
The First Trust RBA Quality Income ETF
The First Trust RBA Quality Income ETF seeks investment results that
correspond generally to the price and yield (before the fund’s fees and
expenses) of an equity index called the Richard Bernstein Advisors
Quality Income Index. The index attempts to control the risks associated
with investing in higher-yielding stocks, yet maintain attractive
current income. RBA believes stocks with extremely high dividend yields
should be viewed cautiously. High dividend yields may simply reflect
depressed stock prices in anticipation of dividend cuts or omissions.
RBA believes risk actually increases as dividend yield increases and
that simply investing in high-yield equities often leads to selecting
stocks whose dividends are subsequently cut or discontinued. RBA’s index
incorporates several layers of risk control in order to attempt to
minimize the probability of dividend cuts and the related
underperformance. “As investor appetite for dividend strategy ETFs has
grown in recent years, so has the need for risk management, in order to
avoid so-called “dividend traps,” Issakainen said. Of course, there is
no guarantee that the issuers of the fund’s portfolio securities will
declare dividends in the future or that, if declared, they will either
remain at current levels or increase over time.
For more information about First Trust, please contact Chris Moon of
JCPR at 973-850-7304 or cmoon@jcprinc.com.
About First Trust
First Trust Advisors L.P., along with its affiliate First Trust
Portfolios L.P., are privately-held companies which provide a variety of
investment services, including asset management and financial advisory
services, with collective assets under management or supervision of
approximately $86 billion as of February 28, 2014 through unit
investment trusts, exchange-traded funds, closed-end funds, mutual funds
and separate managed accounts. First Trust is based in Wheaton,
Illinois. For more information, visit http://www.ftportfolios.com.
You should consider each fund’s investment objectives, risks, and
charges and expenses carefully before investing. Contact First Trust
Portfolios L.P. at 1-800-621-1675 to obtain a prospectus or summary
prospectus which contains this and other information about the funds.
The prospectus or summary prospectus should be read carefully before
investing.
ETF Characteristics
The funds list and principally trade their shares on The NASDAQ Stock
Market LLC.
The funds’ returns may not match the returns of the underlying indexes.
The funds may not be fully invested at times. Securities held by the
funds will generally not be bought or sold in response to market
fluctuations.
Investors buying or selling fund shares on the secondary market may
incur customary brokerage commissions. Market prices may differ to some
degree from the net asset value of the shares. Investors who sell fund
shares may receive less than the share’s net asset value. Shares may be
sold throughout the day on the exchange through any brokerage account.
However, unlike mutual funds, shares may only be redeemed directly from
the funds by authorized participants, in very large creation/redemption
units.
Risk Considerations
There can be no assurance that the funds’ investment objectives will be
achieved. The funds’ shares will change in value, and you could lose
money by investing in a fund. One of the principal risks of investing in
the funds is market risk. Market risk is the risk that a particular
security owned by a fund, fund shares or securities in general may fall
in value.
The funds may invest in securities issued by companies concentrated in a
particular industry which involves additional risk, including limited
diversification. The funds may invest in small capitalization and mid
capitalization companies. Such companies may be more vulnerable to
adverse general market or economic developments, and their securities
may be less liquid and may experience greater price volatility than
larger, more established companies as a result of several factors,
including limited trading volumes, products or financial resources,
management inexperience and less publicly available information.
Accordingly, such companies are generally subject to greater market risk
than larger, more established companies.
General risks of industrial companies include the general state of the
economy, intense competition, consolidation, domestic and international
politics, excess capacity and consumer demand and spending trends. They
may also be significantly affected by overall capital spending levels,
economic cycles, technical obsolescence, delays in modernization, labor
relations, government regulations and e-commerce initiatives.
Financial companies are especially subject to the adverse effects of
economic recession, currency exchange rates, government regulation,
decreases in the availability of capital, volatile interest rates,
portfolio concentrations in geographic markets and in commercial and
residential real estate loans, and competition from new entrants in
their fields of business.
AIRR invests in the securities of community banks. Such companies were
significantly impacted by the downturn in the U.S. and world economies
that began with the decline in the subprime mortgage lending market in
the United States. Unlike larger national or other regional banks that
are more geographically diversified, a community bank’s financial
performance may be highly dependent upon the business environment in
certain geographic regions of the United States and may be adversely
impacted by any downturn or unfavorable economic or employment
developments in its local market and the United States as a whole.
Utilities companies are subject to the imposition of rate caps,
increased competition due to deregulation, the difficulty in obtaining
an adequate return on invested capital or in financing large
construction projects, the limitations on operations and increased costs
and delays attributable to environmental considerations, and the capital
market’s ability to absorb utility debt.
QINC invests in securities of non-U.S. issuers. Such securities are
subject to higher volatility than securities of domestic issuers.
Because the fund’s NAV is determined on the basis of U.S. dollars and
the fund invests in foreign securities, you may lose money if the local
currency of a foreign market depreciates against the U.S. dollar.
Additionally, the fund invests in depositary receipts, usually in the
form of ADRs or GDRs. Investment in ADRs or GDRs may be less liquid than
the underlying shares in their primary trading market.
The funds currently have fewer assets than larger funds, and like other
relatively new funds, large inflows and outflows may impact the funds’
market exposure for limited periods of time.
The funds are classified as “non-diversified.” A non-diversified fund
generally may invest a larger percentage of its assets in the securities
of a smaller number of issuers. As a result, the funds may be more
susceptible to the risks associated with these particular companies, or
to a single economic, political or regulatory occurrence affecting these
companies.
The funds are not sponsored, endorsed, sold or promoted by RBA. RBA
makes no representation or warranty, express or implied, to the owners
of the funds or any member of the public regarding the advisability of
trading in the funds. RBA’s only relationship to First Trust Advisors
L.P. (“First Trust”) is the licensing of certain trademarks and trade
names of RBA and of the indexes, which are determined, composed and
calculated by RBA without regard to First Trust or the funds. Licensor
has no obligation to take the needs of First Trust or the owners of the
funds into consideration in determining, composing or calculating the
indexes. Licensor is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the funds to
be listed or in the determination or calculation of the equation by
which the funds are to be converted into cash. Licensor has no
obligation or liability in connection with the administration, marketing
or trading of the funds.
Copyright Business Wire 2014