High-Yield Income Closed-End Portfolio, Series 85
One thing that has not changed over the years is the need for some investors to earn high current income. Investors willing to assume certain credit and market risks have the potential to earn a high level of current monthly income by investing in high-yield bonds. The High-Yield Income Closed-End Portfolio is comprised of a well-diversified pool of closed-end funds that invest in U.S. and foreign high-yield bonds.
Although subject to greater risks, high-yield bond investors have historically
received greater returns from their high-yield investments than investment grade
bond investors. Of course, there can be no assurance that high-yield securities
will outperform investment grade bonds in the future or that the default rate
on high-yield securities will not rise.
Closed-end funds are structured to generally provide a more stable income stream
than other managed fixed-income investment products because they are not subjected
to cash inflows and outflows, which can dilute dividends over time. However,
as a result of bond calls, redemptions and advanced refundings, which can dilute
a fund's income, the portfolio cannot guarantee consistent income. Although
one of the portfolio's objectives is to seek a high rate of current monthly
income, there is no assurance the objective will be met.
Since closed-end funds maintain a relatively fixed pool of investment capital,
portfolio managers are better able to adhere to their investment philosophies
through greater flexibility and control. In addition, closed-end funds don't
have to manage fund liquidity to meet potentially large redemptions.
This unit investment trust seeks a high rate of current monthly income, with capital appreciation as a secondary objective. There is, however, no assurance that the objectives will be achieved.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial advisor
or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
An investment in this unmanaged unit investment trust should be made with an
understanding of the risks associated with an investment in a portfolio of high-yield
Closed-end funds 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 the funds or their underlying
investments change. 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 employ the use of leverage, which increases the volatility
of such funds.
Investing in high-yield securities should be viewed as speculative and you should review your ability to assume the risks associated with investments that utilize such bonds. High-yield securities are subject to numerous risks including higher interest rates, economic recession, deterioration of the junk bond market, possible downgrades and defaults of interest and/or principal. High-yield security prices tend to fluctuate more than higher rated bonds and are affected by short-term credit developments to a greater degree.
All of the closed-end funds invest in senior loans. The yield on closed-end funds which invest in
senior loans will generally decline in a falling interest rate environment and increase in a rising
interest rate environment. Senior loans are generally below investment grade quality (high-yield
securities or “junk” bonds). An investment in senior loans involves the risk that the borrowers may
default on their obligations to pay principal or interest when due.
Certain of the closed-end funds invest in investment grade
securities. Investment grade securities are subject to numerous
risks including higher interest rates, economic recession,
deterioration of the investment grade bond market or investors’
perception thereof, possible downgrades and defaults of interest
Certain of the closed-end funds invest in limited duration bonds.
Limited duration bonds are subject to interest rate risk, which is
the risk that the value of a security will fall if interest rates
increase. While limited duration bonds are generally subject to
less interest rate sensitivity than longer duration bonds, there
can be no assurance that interest rates will not rise during the
life of the trust.
All of the closed-end funds invest in floating-rate securities. A floating-rate security is an
instrument in which the interest rate payable on the obligation fluctuates on a periodic basis
based upon changes in an interest rate benchmark. As a result, the yield on such a security will
generally decline in a falling interest rate environment, causing the trust to experience a reduction
in the income it receives from such securities. Certain of the floating-rate securities pay interest
based on LIBOR. Due to the uncertainty regarding the future utilization of LIBOR and the nature of
any replacement rate, the potential effect of a transition away from LIBOR on a fund or the
financial instruments in which the fund invests cannot yet be determined.
An investment which includes securities issued by foreign
issuers should be made with an understanding of the additional
risks involved such as currency and interest rate fluctuations,
nationalization or other adverse political or economic
developments, lack of liquidity of certain foreign markets,
withholding, the lack of adequate financial information, and
exchange control restrictions impacting foreign issuers. Risks
associated with investing in foreign securities may be more
pronounced in emerging markets where the securities markets
are substantially smaller, less developed, less liquid, less
regulated, and more volatile than the U.S. and developed
As the use of Internet technology has become more prevalent in
the course of business, the trust has become more susceptible to
potential operational risks through breaches in cyber security.
This UIT is a buy and hold strategy and investors should consider their ability to hold the trust until maturity. There may be tax consequences unless units are purchased in an IRA or other qualified plan.
The value of the securities held by the trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers.
It is important to note that an investment can be made in the underlying funds directly rather than through the trust. These direct investments can be made without paying the trust’s sales charge, operating expenses and organizational costs.
For a discussion of additional risks of investing in the trust see the "Risk Factors" section of the prospectus.