Strategic Income Closed-End Portfolio, Series 88
The Multi-Sector Approach
The Strategic Income Closed-End Portfolio seeks to provide investors a high rate of current monthly income and diversification across various fixed income securities. To accomplish this, the portfolio is diversified across a broad range of closed-end funds that invest in U.S. and foreign taxable bonds. Because different sectors within the taxable debt market follow different cycles and react differently to changes in global economies and interest rates, spreading assets across this spectrum of securities has the potential to reduce the overall risk of the portfolio.
Unlike open-end mutual funds, closed-end funds maintain a relatively fixed pool
of investment capital. This allows portfolio managers to better 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
The portfolio offers investors diversification by investing in a broad range
of taxable debt closed-end funds that are further diversified across hundreds
of individual issues. Diversification does not guarantee a profit or protect
Closed-end funds are structured to generally provide a more stable income stream than other
managed investment products because they are not subjected to cash inflows and outflows,
which can dilute distributions over time. However, stable income cannot be assured.
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 of the portfolio 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 professional
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 closed-end funds.
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
from their net asset value in the secondary market. Certain closed-end
funds in which the portfolio invests employ the use of leverage, which
increases the volatility of such funds.
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. All of the floating-rate
securities pay interest based on LIBOR. The United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate over a phase-out period that began in
early 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023. The unavailability
or replacement of LIBOR may affect the value, liquidity or return on certain portfolio investments. Any potential effects of the transition away from LIBOR can be difficult to ascertain, and they may vary depending on a variety
of factors and they could result in losses to the portfolio.
All of the closed-end funds invest in high-yield securities or “junk” bonds. Investing in high-yield securities should be viewed as speculative and you should review your ability to assume the risks associated with investments
which utilize such securities. 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 securities and are affected by short-term credit developments to a greater degree.
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 security market or investors’ perception thereof,
possible downgrades and defaults of interest and/or principal.
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.
Certain of the closed-end funds invest in senior loan securities. 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 (“junk” bonds). An investment in
senior loans involves the risk that the borrowers may default on their obligations to pay principal or interest
Certain of the closed-end funds invest in covenant-lite loans which
contain fewer or no maintenance covenants and may hinder the
closed-end funds’ ability to reprice credit risk and mitigate potential
loss especially during a downturn in the credit cycle.
Securities of non-U.S. issuers are 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.
Risks associated with investing in non-U.S. securities may be more pronounced in emerging and developing markets where the securities markets are substantially smaller, less developed, less liquid, less regulated, and more
volatile than the U.S. and developed non-U.S. markets.
The United Kingdom’s official departure from the European
Union (commonly referred to as “Brexit”) led to volatility in global financial markets, in particular those of
the United Kingdom and across Europe, and the weakening in political, regulatory, consumer, corporate and
financial confidence in the United Kingdom and Europe. It is not currently possible to determine the extent of
the impact that Brexit may have on the portfolio’s investments and this uncertainty could negatively impact
current and future economic conditions in the United Kingdom and other countries, which could negatively
impact the value of the portfolio’s investments.
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
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 investments as well
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