This Collective Investment Fund seeks to provide an above average total return by investing in:
These investments typically react favorably in an inflationary environment. However, there can be no assurance that the Fund will achieve its objective or provide a positive return during an inflationary period.
This Fund is available for investment by eligible qualified retirement plan trusts only and has been created specifically for 401(k) and other employer sponsored retirement plan investors.
Three share classes of the First Trust Counter Inflation Portfolio are currently offered. For more information, click on the desired share class below.
When it comes to investing — whether for income or for growth — investors can't afford to ignore the eroding effect inflation can have on the value of their assets. (Inflation is essentially a measure of the increase in the price of goods and services.) According to the U.S. Bureau of Labor Statistics, inflation has reduced Americans' purchasing power in every year but two dating back to 1945.
In today's economic environment, inflation has largely been held in check, which is why it might be easy to overlook inflation when building an investment portfolio. However, there is growing concern that government spending (which was designed to ease the recession and revive the U.S. economy) could spark inflation going forward. According to Bloomberg, the U.S. will have committed over $12 trillion to solving the financial crisis. The U.S.Treasury likely borrowed a record $2.5 trillion in 2009, according to Goldman Sachs Group Inc.
The First Trust Counter Inflation Portfolio seeks to provide investors with a diversified way to help combat a possible rising inflationary environment.
What are the Risks of Investing in the Fund?:
The Fund is not a mutual fund and its shares are not deposits of the Trust or the Adviser, and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other agency. The shares are securities which have not been registered under the 1933 Act and the Fund is exempted from investment company registration under the 1940 Act. Therefore, participating plans and their participants will not be entitled to the protections under these Acts. As defined in the Declaration of Trust establishing the Fund, the Fund is available for investment by eligible qualified retirement plans only. Management of the Trust, however, is generally subject to the fiduciary duty and prohibited transaction rules under ERISA.
As with any investment, you can lose money by investing in the Fund. Before investing you should consider carefully the following risks that you assume when you invest in the Fund. For more information regarding the following risks, please consult the Fund's Information Statement.
Market Risk. A particular security owned by the Fund, shares of the Fund or securities in general may fall in value. Securities are subject to market fluctuations caused by such factors as economic, political, regulatory or market developments. Small and/or mid capitalization 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.
ETF Risk. ETFs are subject to various risks, including management's ability to meet the fund's investment objective, and to manage the fund's portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors' perceptions regarding ETFs or their underlying investments change. You will bear not only your share of the Fund's expenses, but also the expenses of the underlying ETFs.
Index Correlation Risk. The performance of an ETF will vary from the actual performance of the fund's target index, known as "tracking error." This can happen due to transaction costs, market impact, corporate actions and timing variances. Some ETFs use a technique called "representative sampling," this could increase the risk of a tracking error.
Concentration Risk. The Fund may be concentrated in certain sectors. A portfolio concentrated in a single sector may present more risks than a portfolio broadly diversified over several sectors.
Energy Company Risk. The Fund invests in energy companies. General problems of the energy companies include volatile fluctuations in price and supply of energy fuels, international politics, terrorist attacks, reduced demand as a result of increases in energy efficiency and energy conservation, the success of exploration projects, clean-up and litigation costs relating to oil spills and environmental damage, and tax and other regulatory policies of various governments. Natural disasters may also impact the petroleum industry. Oil production and refining companies are subject to extensive federal, state and local environmental laws and regulations regarding air emissions and the disposal of hazardous materials. In addition, recently oil prices have been extremely volatile.
Materials Company Risk. The Fund invests in basic materials companies. General risks of the materials sector include the general state of the economy, consolidation, domestic and international politics and excess capacity. In addition, basic materials companies may also be significantly affected by volatility of commodity prices, import controls, worldwide competition, liability for environmental damage, depletion of resources and mandated expenditures for safety and pollution control devices.
Precious Metals Company Risk.The Fund also invests in precious metals companies which include companies involved in the materials sector. In addition to the Materials Company risks noted above, precious metals companies are subject to risks associated with the exploration, development and production of precious metals including competition for land, difficulties in obtaining required governmental approval to mine land, inability to raise adequate capital, increases in production costs and political unrest in nations where sources of precious metals are located. In addition, the price of gold and other precious metals is subject to wide fluctuations and may be influenced by limited markets, fabricator demand, expected inflation, return on assets, central bank demand and availability of substitutes.
Commodities Risk.The Fund may invest in ETFs that invest in commodities. The value of commodities and commodity-linked instruments typically is based upon the price movements of a physical commodity or an economic variable linked to such price movements. The prices of commodities and commodity-related investments may fluctuate quickly and dramatically and may not correlate to price movements in other asset classes. An active trading market may not exist for certain commodities. Each of these factors and events could have a significant negative impact on the Fund.
Inflation Protection Securities Risk.The Fund may invest in ETFs that invest in Treasury Inflation-Protected Securities ("TIPS") issued by the U.S. Department of Treasury or similar securities issued by foreign governments. In a falling inflationary environment, both interest payments and the value of the TIPS and other inflation-protected securities will decline.
Non U.S. Securities and Emerging Markets Risk. The Fund invests in securities of non-U.S. issuers or ETFs that invest in non-U.S. issuers. Such securities are subject to higher volatility than securities of domestic issuers due to possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. These risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries.
Closed-End Funds and REITs Risk. Because the Fund may invest in closed-end funds and REITs, it may be subject to additional risks. Unlike open-end funds, which trade at prices based on a current determination of the fund's net asset value, closed-end funds frequently trade at a discount to their net asset value in the secondary market. Certain closed-end funds may employ the use of leverage which increases the volatility of such funds. Investing in REITs involves certain other risks related to their structure and focus, which include, but are not limited to, dependency upon management skills, limited diversification, the risks of locating and managing financing for projects, heavy cash flow dependency, possible default by borrowers, the costs and potential losses of self-liquidation of one or more holdings, the risk of a possible lack of mortgage funds and associated interest rate risks, among others, which may result in less market liquidity and greater price volatility.
Interest Rate Risk. Interest rate risk is the risk that the value of the bonds held by the ETFs in which the Fund invests will fall if interest rates increase. Bonds typically fall in value when interest rates rise and rise in value when interest rates fall.
Credit Risk. Credit risk is the risk that a bond's issuer is unable to meet its obligation to pay principal or interest on the bonds held by ETFs in which the Fund invests.