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First Trust Preferred Securities and Income ETF (FPE)
  • 2016 Estimated Capital Gain Distributions
    Certain First Trust Exchange-Traded Funds are expected to pay a long-term capital gain distribution in December.  For a list of exchange-traded funds expected to pay a long-term capital gain distribution, please click here.  Short-term capital gain distributions, if any, are expected to be nominal and are taxed like ordinary income.  Final determination of the source and tax status of all distributions paid in the current year are to be made after year-end and could differ from the expectations noted above. 
Investment Objective/Strategy - The First Trust Preferred Securities and Income ETF is an actively managed exchange-traded fund. The fund's investment objective is to seek total return and to provide current income. Under normal market conditions, the fund invests at least 80% of its net assets (including investment borrowings) in preferred securities and income-producing debt securities including corporate bonds, high yield securities and convertible securities.
There can be no assurance that the Fund's investment objectives will be achieved.
Fund Overview
Fund TypePreferred Income
Investment AdvisorFirst Trust Advisors L.P.
Investor Servicing AgentBrown Brothers Harriman
Portfolio Manager/Sub-AdvisorStonebridge Advisors LLC
Fiscal Year-End10/31
ExchangeNYSE Arca
Inception Price$19.99
Inception NAV$19.99
Expense Ratio0.86%
Current Fund Data (as of 12/1/2016)
Closing NAV1$18.79
Closing Share Price2$18.80
Bid/Ask Midpoint$18.79
Bid/Ask Discount0.02%
Total Net Assets$1,428,367,719
Outstanding Shares76,005,000
Daily Volume653,581
Average 30-Day Daily Volume756,270
Closing Share Price 52-Week High/Low$19.70 / $17.85
Closing NAV 52-Week High/Low$19.67 / $17.79
Number of Holdings171
Fund Characteristics (as of 10/31/2016)
Weighted Average Effective Duration74.41 Years
% Institutional Securities (e.g. $1000 par)856.03%
% Retail Securities (e.g. $25 par)943.97%
Top Holdings (as of 12/1/2016)
Holding Percent
EMERA INC Variable rate, due 06/15/2076 3.00%
GMAC Capital Trust I, Series 2, Variable Rate, Due 02/15/2040 2.69%
ENEL SPA Variable rate, due 09/24/2073 2.49%
Morgan Stanley, Series F, 6.875%, Variable Rate 2.21%
The Goldman Sachs Group, Inc., Series K, 6.375%, Variable Rate 2.16%
VEREIT, Inc., Series F, 6.700% 1.67%
LA MONDIALE Variable rate 1.63%
AQUARIUS + INV(SWISS RE) Variable rate 1.55%
Farm Credit Bank of Texas, Series 1, 10% 1.55%
TRANSCANADA TRUST Variable rate, due 08/15/2076 1.46%

Holdings are subject to change.

Security Type Breakdown (as of 10/31/2016)
Security Percent
Fixed-to-Floating Rate Securities 65.18%
Fixed Rate Securities 28.49%
Floating Rate Securities 6.33%
NAV History (Since Inception)
Past performance is not indicative of future results.
Overall Morningstar RatingTM (as of 10/31/2016)3

Among 41 funds in the Preferred Stock category. This fund was rated 4 stars/41 funds (3 years).
Distribution Information
Dividend per Share Amt4$0.0971
30-Day SEC Yield (as of 10/31/2016)55.56%
12-Month Distribution Rate (as of 10/31/2016)65.87%
Bid/Ask Midpoint vs. NAV (as of 9/30/2016)
Number of Days Bid/Ask Midpoint Above NAV
Quarter Ended 0-49
Basis Points
Basis Points
Basis Points
Basis Points
9/30/2016 59 0 0 0
6/30/2016 49 4 0 0
3/31/2016 49 4 0 0
12/31/2015 47 11 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49
Basis Points
Basis Points
Basis Points
Basis Points
9/30/2016 5 0 0 0
6/30/2016 11 0 0 0
3/31/2016 7 1 0 0
12/31/2015 6 0 0 0

The price used to calculate market return is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange, on which shares of the Fund are listed for trading, as of the time that the Fund's NAV is calculated.

Top Country Breakdown (as of 12/1/2016)
Country Percent
United States 60.24%
France 7.08%
United Kingdom 6.94%
Canada 4.59%
Bermuda 4.15%
Italy 3.22%
Australia 3.13%
The Netherlands 2.88%
Ireland 2.73%
Switzerland 1.47%
Credit Quality (as of 10/31/2016)
A 0.43%
A- 2.17%
BBB+ 8.97%
BBB 14.90%
BBB- 21.90%
BB+ 23.32%
BB 7.45%
BB- 6.75%
B+ 4.28%
B 0.07%
B- 0.12%
NR 9.64%
The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including Standard & Poor's Rating Group, a division of the McGraw Hill Companies, Inc., Moody's Investors Service, Inc., Fitch Ratings, or a comparably rated NRSRO. For situations in which a security is rated by more than one NRSRO and the ratings are not equivalent, the highest ratings are used. Sub-investment grade ratings are those rated BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change.
Top Industry Exposure (as of 12/1/2016)
Banks 34.48%
Insurance 16.18%
Capital Markets 12.37%
Electric Utilities 7.45%
Food Products 4.39%
Diversified Financial Services 4.21%
Consumer Finance 4.19%
Oil, Gas & Consumable Fuels 3.96%
Equity Real Estate Investment Trusts (REITs) 3.30%
Diversified Telecommunication Services 2.50%
Month End Performance (as of 10/31/2016)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund Performance *
Net Asset Value (NAV) 1.41% 8.25% 8.97% 8.36% N/A N/A 5.01%
After Tax Held 0.78% 5.97% 6.18% 5.67% N/A N/A 2.49%
After Tax Sold 0.80% 4.62% 5.00% 5.15% N/A N/A 2.63%
Market Price 1.26% 8.23% 8.89% 8.35% N/A N/A 5.06%
Index Performance
Bank of America Merrill Lynch Fixed Rate Preferred Securities Index -0.65% 6.00% 7.23% 9.03% N/A N/A 6.18%
Bank of America Merrill Lynch U.S. Capital Securities Index 1.75% 8.17% 7.31% 6.03% N/A N/A 5.93%
Blended Benchmark 0.55% 7.09% 7.28% 7.54% N/A N/A 6.07%
Quarter End Performance (as of 9/30/2016)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund Performance *
Net Asset Value (NAV) 3.65% 7.91% 10.59% 8.61% N/A N/A 5.04%
After Tax Held 3.02% 5.83% 7.76% 5.93% N/A N/A 2.51%
After Tax Sold 2.07% 4.43% 5.91% 5.35% N/A N/A 2.65%
Market Price 4.18% 8.11% 10.80% 8.85% N/A N/A 5.15%
Index Performance
Bank of America Merrill Lynch Fixed Rate Preferred Securities Index 1.22% 6.37% 10.05% 9.75% N/A N/A 6.43%
Bank of America Merrill Lynch U.S. Capital Securities Index 3.84% 7.74% 7.98% 6.89% N/A N/A 5.96%
Blended Benchmark 2.52% 7.06% 9.03% 8.32% N/A N/A 6.21%
3-Year Statistics (as of 10/31/2016)
  Standard Deviation Alpha Beta Sharpe Ratio Correlation
FPE 3.36% 1.00 0.97 2.30 0.95
Bank of America Merrill Lynch Fixed Rate Preferred Securities Index 3.83% 0.98 1.06 2.18 0.91
Bank of America Merrill Lynch U.S. Capital Securities Index 3.50% -0.98 0.94 1.60 0.89
Blended Benchmark 3.31% --- 1.00 2.11 1.00
Standard Deviation is a measure of price variability (risk). Alpha is an indication of how much an investment outperforms or underperforms on a risk-adjusted basis relative to its benchmark.Beta is a measure of price variability relative to the market. Sharpe Ratio is a measure of excess reward per unit of volatility. Correlation is a measure of the similarity of performance.

*Performance data quoted represents past performance. Past performance is not a guarantee of future results and current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and shares when sold or redeemed, may be worth more or less than their original cost.

After Tax Held returns represent return after taxes on distributions. Assumes shares have not been sold. After Tax Sold returns represent the return after taxes on distributions and the sale of fund shares. Returns do not represent the returns you would receive if you traded shares at other times. Market Price returns are based on the midpoint of the bid/ask spread on the stock exchange on which shares of the fund are listed for trading as of the time that the fund’s NAV is calculated. Returns are average annualized total returns, except those for periods of less than one year, which are cumulative.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

Indexes do not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Indexes are unmanaged and an investor cannot invest directly in an index.
The expense ratio for this fund is 0.86%.

Bank of America Merrill Lynch Fixed Rate Preferred Securities Index - The Index tracks the performance of fixed rate US dollar denominated preferred securities issued in the US domestic market.

Bank of America Merrill Lynch U.S. Capital Securities Index - The Index is a subset of the BofA Merrill Lynch U.S. Corporate Index including all fixed-to-floating rate, perpetual callable and capital securities.

Blended Benchmark - The Blended Benchmark consists of a 50/50 blend of the BofA Merrill Lynch Fixed Rate Preferred Securities Index and the BofA Merrill Lynch U.S. Capital Securities Index. The Blended Benchmark was added to reflect the diverse allocation of institutional preferred and hybrid securities in the fund's portfolio. The indexes do not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.

1 The NAV represents the fund's net assets (assets less liabilities) divided by the fund's outstanding shares .
2 Fund shares are purchased and sold on an exchange at their share price rather than net asset value (NAV), which may cause the shares to trade at a price greater than NAV (premium) or less than NAV (discount).
The Morningstar RatingTM is provided for those exchange-traded funds ("ETFs") with at least a three-year history. Ratings are based on the ETF's Morningstar Risk-Adjusted Return measure which accounts for variation in monthly performance, placing more emphasis on downward variations and rewarding consistent performance. An ETF's risk-adjusted return includes a brokerage commission estimate. This estimate is intended to reflect what an average investor would pay when buying or selling an ETF. PLEASE NOTE, this estimate is subject to change and the actual brokerage commission an investor pays may be higher or lower than this estimate. Morningstar compares each ETF's risk-adjusted return to the open-end mutual fund rating breakpoints for that category. Consistent with the open-end mutual fund ratings, the top 10% of ETFs in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The overall rating for an ETF is based on a weighted average of the time-period ratings (e.g., the ETF's 3,5, and 10 year rating). The determination of an ETF's rating does not affect the retail open end mutual fund data published by Morningstar. Past performance is no guarantee of future results.
4 Most recent distribution paid or declared to today's date. Subject to change in the future. There is no guarantee that the fund will declare dividends.
5 The 30-day SEC yield is calculated by dividing the net investment income per share earned during the most recent 30-day period by the maximum offering price per share on the last day of the period and includes the effects of fee waivers and expense reimbursements, if applicable.
6 12-Month Distribution Rate is calculated by dividing the sum of the fund's trailing 12-month ordinary distributions paid or declared by the NAV price. Distribution rates may vary.
7 A measure of a bond's sensitivity to interest rate changes that reflects the change in a bond's price given a change in yield. It accounts for the likelihood of changes in the timing of cash flows in response to interest rate movements.
8 Institutional Securities are predominantly $1000 par securities and only trade over-the-counter.
9 Retail Securities are predominantly $25 par securities but also include exchange-traded $20, $50, and $100 par securities.
10 Inception Date is 2/11/2013

You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. You can download a prospectus or summary prospectus, or contact First Trust Portfolios L.P. at 1-800-621-1675 to request a prospectus or summary prospectus which contains this and other information about the fund. The prospectus or summary prospectus should be read carefully before investing.

ETF Characteristics

The fund lists and principally trades its shares on the NYSE Arca, Inc.

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 fund by authorized participants, in very large creation/redemption units. If the fund's authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a discount to the fund's net asset value and possibly face delisting.

Risk Considerations

The fund's shares will change in value and you could lose money by investing in the fund. The fund is subject to management risk because it is an actively managed portfolio. In managing the fund's investment portfolio, the sub-advisor will apply investment techniques and risk analyses that may not have the desired result. There can be no assurance that the fund's investment objectives will be achieved.

The fund is subject to market risk. Market risk is the risk that a particular security owned by the fund or shares of the fund in general may fall in value. Some of the securities held by the fund may be illiquid.

Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt instruments in a company's capital structure, in terms of priority to corporate income, and therefore will be subject to greater credit risk than those debt instruments. Preferred securities are also subject to credit risk, interest rate risk and income risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and that the value of a security may decline as a result. Interest rate risk is the risk that the value of fixed-income securities in the fund will decline because of rising market interest rates. Income risk is the risk that income from the fund's portfolio could decline if interest rates fall.

The fund may invest in high yield securities, or "junk" bonds, which are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, may be highly speculative. The market for high yield securities is smaller and less liquid than that for investment grade securities.

The fund is concentrated in securities of companies in the financial sector which involves additional risks, including limited diversification. 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.

The fund may invest in REITs. Companies involved in the real estate industry are subject to changes in the real estate market, vacancy rates and competition, volatile interest rates and economic recession.

An investment in a fund containing securities of non-U.S. issuers is subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.

The fund may invest in depositary receipts which may be less liquid than the underlying shares in their primary trading market. The fund may effect a portion of creations and redemptions for cash, rather than in-kind securities. As a result, the fund may be less tax-efficient.

The fund is classified as "non-diversified" and may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers.

First Trust Advisors L.P. is the adviser to the fund. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund's distributor.

©2016 Morningstar, Inc. All Rights Reserved. The Morningstar RatingTM information contained herein: (1) is proprietary to Morningstar;(2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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