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First Trust Mortgage Income Fund (FMY)
Investment Objective/Strategy - First Trust Mortgage Income Fund (the "Fund") is a diversified, closed-end management investment company. The Fund's primary investment objective is to seek a high level of current income. As a secondary objective, the Fund seeks to preserve capital. The Fund will pursue its objectives by investing primarily in mortgage-backed securities representing part ownership in a pool of either residential or commercial mortgage loans that, in the opinion of the Fund's investment advisor, offer an attractive combination of credit quality, yield and maturity.
There can be no assurance that the Fund's investment objectives will be achieved. The Fund may not be appropriate for all investors.
Fund Overview
TickerFMY
Fund TypeFixed Income
Investment AdvisorFirst Trust Advisors L.P.
Investor Servicing AgentBNY Mellon Investment Servicing (US) Inc.
CUSIP33734E103
Fiscal Year-End10/31
ExchangeNYSE
Inception5/25/2005
Inception Price$20.00
Inception NAV$19.10
Current Fund Data (as of 1/27/2023)
Closing NAV1$12.46
Closing Market Price2$11.38
Discount to Net Asset Value (NAV)8.67%
Total Net Assets$52,475,674
Common Shares Outstanding4,213,115
Dividend FrequencyMonthly
Dividend Per Share Amt3$0.0550
Distribution Rate45.80%
Daily Volume6,593
Average 30-Day Daily Volume5,363
Closing Market Price 52-Week High/Low$13.27 / $10.54
Closing NAV 52-Week High/Low$13.70 / $11.98
Expense Ratios (as of 10/31/2022)
Annual ExpensesPercent of
Net Assets
Percent of
Managed
Assets
Management Fees0.85%0.85%
Other Expenses
0.48%
0.48%
Total Operating Expenses1.33%1.33%
 
Leverage Costs0.00%0.00%
 
Total Annual Expenses1.33%1.33%
 
Leverage costs include interest, fees and any upfront/offering costs associated with borrowings by the Fund.
Asset Type Breakdown (as of 12/31/2022)7
  Asset Percent
Non-Agency Mortgage Backed Securities 60.35%
Agency MBS 34.02%
U.S. Treasury Futures 31.89%
Asset Backed Securities 3.55%
Cash & Cash Equivalents -29.81%
Market Price and NAV History (Since Inception)
Past performance is not indicative of future results.
% Premium/Discount (Since Inception)
Leverage Information6
The Fund currently has no outstanding leverage.
Portfolio Characteristics (as of 12/31/2022)
Weighted Average Effective Duration54.64 Years
Weighted Average Effective Duration (Long Positions)54.64 Years
Weighted Average Effective Duration (Short Positions)50 Years
Weighted Average Effective Maturity7.62 Years
Credit Quality Breakdown (as of 12/31/2022)7
Credit Quality Percent
Government & Agency 65.91%
Cash & Cash Equivalents -29.81%
AAA 18.63%
AA+ 1.83%
AA 0.55%
AA- 0.98%
A+ 1.10%
A 0.04%
BBB 0.10%
BBB- 7.74%
BB 0.59%
BB- 1.93%
B 1.09%
CCC 0.02%
CCC- 0.06%
C 0.79%
NR 28.45%
The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including S&P Global Ratings, 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.
Performance (as of 12/31/2022)
  3 Month YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception8
Fund Performance *
Net Asset Value (NAV) 0.07% -7.07% -7.07% -1.33% 0.48% 2.07% 4.32%
Market Price 0.93% -13.05% -13.05% -2.10% 0.45% 1.24% 3.58%

*Total return is the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and changes in the NAV and Market Price. The NAV total return takes into account the fund's total annual expenses and does not reflect sales load. Returns are average annualized total returns, except those for periods of less than one year, which are cumulative. Past performance is not indicative of future results.

Footnotes
1 The fund's NAV is calculated by dividing the value of all the fund's assets, less all liabilities, by the total number of common shares outstanding.
2 Fund shares are purchased and sold on an exchange at their market 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).
3 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.
4 Distribution rates are calculated by annualizing the most recent distribution paid or declared through today's date and then dividing by the most recent market price. The distribution consists of the sum of net investment income, net realized short-term capital gains, net realized long-term capital gains, and return of capital. Distribution rates may vary. Any distribution adjustment will not be reflected until after the declaration date for the next distribution. See the fund's 19a-1 Notices, if any, located under the "News & Literature" section of the website for estimates of distribution sources. Final determination of the source and tax status of all distributions paid in the current year will be made after year-end.
5 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.
6 Leverage is a technique where a closed-end fund's manager borrows assets at one rate and invests the proceeds from the borrowed assets at another rate, seeking to increase yield and total return. Use of leverage can result in additional risk and cost, and can magnify the effect of any losses.
7 Market value information used in calculating the percentages is based upon trade date plus one recording of transactions, which can differ from regulatory financial reports (Forms N-CSR and N-PORT Part F) that are based on trade date recording of security transactions. Holdings are subject to change.
8 Inception Date is 5/25/2005

Risk Considerations

Risks are inherent in all investing. Certain risks applicable to the Fund are identified below, which includes the risk that you could lose some or all of your investment in the Fund. The principal risks of investing in the Fund are spelled out in the Fund's annual shareholder reports. The order of the below risk factors does not indicate the significance of any particular risk factor. The Fund also files reports, proxy statements and other information that is available for review.

Investment return and market value of an investment in the fund will fluctuate. Shares, when sold, may be worth more or less than their original cost.

A risk of CMOs is the uncertainty of the timing of cash flows that results from the rate of prepayments on the underlying mortgages serving as collateral and from the structure of the particular CMO transaction (that is, the priority of the individual tranches).

Ratings assigned by a credit rating agency are opinions of such entities, not absolute standards of credit quality and they do not evaluate risks of securities. Any shortcomings or inefficiencies in the process of determining credit ratings may adversely affect the credit ratings of the securities held by a fund and their perceived or actual credit risk.

High yield securities, or "junk" bonds, are less liquid and are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, are considered to be highly speculative.

A fund is susceptible to operational risks through breaches in cyber security. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss.

The debt securities in which the fund invests are subject to certain risks, including issuer risk, reinvestment risk, prepayment risk, credit risk, and interest rate risk. Issuer risk is the risk that the value of fixed-income securities may decline for a number of reasons which directly relate to the issuer. Reinvestment risk is the risk that income from the fund's portfolio will decline if the fund invests the proceeds from matured, traded or called bonds at market interest rates that are below the fund portfolio's current earnings rate. Prepayment risk is the risk that, upon a prepayment, the actual outstanding debt on which the fund derives interest income will be reduced. 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 fixed-income securities will decline in value because of changes in market interest rates.

Extension risk is the risk that, when interest rates rise, certain obligations will be paid off by the issuer (or other obligated party) more slowly than anticipated, causing the value of these debt securities to fall. Rising interest rates tend to extend the duration of debt securities, making their market value more sensitive to changes in interest rates.

The risk of a position in a futures contract may be very large compared to the relatively low level of margin a fund is required to deposit and a relatively small price movement in a futures contract may result in immediate and substantial loss relative to the size of margin deposit.

Certain fund investments may be subject to restrictions on resale, trade over-the-counter or in limited volume, or lack an active trading market. Illiquid securities may trade at a discount and may be subject to wide fluctuations in market value.

To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a reference rate over a phase-out period that will begin immediately after December 31, 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund.

Use of leverage can result in additional risk and cost, and can magnify the effect of any losses.The portfolio managers of an actively managed portfolio will apply investment techniques and risk analyses that may not have the desired result.

Shares of closed-end investment companies such as the Fund frequently trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset value.

Market risk is the risk that a particular security, or shares of a fund in general may fall in value. Securities are subject to market fluctuations caused by such factors as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious disease or other public health issues, recessions, or other events could have significant negative impact on a fund. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed "reasonably" normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.

A mortgage-backed security may be negatively affected by the quality of the mortgages underlying such security and the structure of its issuer. A portion of the fund's managed assets may be invested in subordinated classes of mortgage-backed securities. Such subordinated classes are subject to a greater degree of non-payment risk than are senior classes of the same issuer or agency. Mortgage-related securities are more susceptible to adverse economic, political or regulatory events that affect the value of real estate.

There are no government or agency guarantees of payments in securities offered by non- government issuers, therefore they are subject to the credit risk of the issuer. Non-agency securities often trade "over-the-counter" and there may be a limited market for them making them difficult to value.

A fund and a fund's advisor may seek to reduce various operational risks through controls and procedures, but it is not possible to completely protect against such risks. The fund also relies on third parties for a range of services, including custody, and any delay or failure related to those services may affect the fund's ability to meet its objective.

First Trust and the fund's portfolio managers have interests that may conflict with the interests of the fund. First Trust manages and/or advises funds with similar investment objectives and strategies as the fund. In addition, the use of leverage increases the amount of management and advisory fees paid to First Trust and therefore, First Trust has a financial incentive to leverage the fund.

At the time of delivery of TBA securities, the value may be more or less than the purchase or sale price. Purchasing securities in a TBA Transaction may give rise to investment leverage and may increase the Fund's volatility.

The valuation of municipal bonds or securitized assets may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. The fund may hold investments in sizes smaller than institutionally-sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If the fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots.

The risks of investing in the fund are spelled out in the prospectus, shareholder report and other regulatory filings.

CUSIP identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by FactSet Research Systems Inc. and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database, ©2023 CUSIP Global Services. "CUSIP" is a registered trademark of the American Bankers Association.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
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