Target Diversified Global Allocation, 2nd Quarter 2021 Series
The Target Diversified Global Allocation Portfolio is a unit investment trust which seeks to provide broad equity diversification by investing in common stocks across various market capitalizations, growth and value styles, sectors and countries. The trust invests in a fixed portfolio of stocks which are selected by applying pre-determined screens and factors and holds the stocks for approximately 15 months. The trust seeks above-average total return; however, there is no assurance the objective will be met. The portfolio is comprised of the two strategies described below.
Diversified Equity Strategic Allocation Strategy – 60%
- Establish a universe of stocks from seven distinct styles consisting of six
domestic equity asset classes and one international equity asset class.
- The domestic universe is established by identifying the 3,000 largest U.S. stocks (excluding limited partnerships, royalty trusts, registered investment companies and business development companies) and then separating them into large-cap (largest 10%), mid-cap (next 20%), and small-cap (remaining 70%). The stocks in each group are then divided evenly between growth and value by their price-to-book ratios to establish the universe of stocks eligible for selection from within each asset class. In the case of the small-cap universe, only the 250 largest stocks with a minimum average daily trading volume of $1,000,000 within each growth and value group are included to ensure sufficient liquidity. The international universe consists of the 100 largest companies from developed nations which are ADRs or directly listed in the United States.
Number of Eligible Stocks in Each Selection Universe
- Apply the rules-based stock selection models:
We then rank the stocks within each of the seven universes based on
two multi-factor models. Half of a stock's ranking is based on a risk
model and the remaining half is based on a model which is determined
by their style designation. Value and international stocks are ranked on
one model while growth stocks are ranked using a separate model.
|Stock Selection Factors
||Value & International Model
|Debt to equity
||Price to book
||Price to sales
||Price to cash flow
||Price to cash flow
||Return on assets
||Change in return on assets
||3-month Price appreciation
||6-month Price appreciation
- Select the 30 highest scoring stocks with the best overall ranking from each of the seven style
classes, subject to a maximum of six stocks from any one of the major market sectors. The
financials and real estate sectors are combined for the sector limit purpose. The seven style
classes are approximately weighted as follows: large-cap growth 25%, large-cap value 25%,
mid-cap growth 10%, mid-cap value 10%, small-cap growth 5%, small-cap value 5% and
international 20%. Stocks are approximately equally weighted within their style.
Target Global Dividend Leaders Strategy – 40%
- Establish three distinct universes which consist of the following: domestic equity,
international equity, and U.S. REITs.
- Registered investment companies and limited partnerships are excluded from all universes.
REITs are also excluded from the domestic and international equity universes.
- Select the stocks in each universe that meet the following criteria:
- Market capitalization greater than $1 billion.
- Three month average daily trading volume greater than $1 million.
- Dividend yield greater than twice that of the S&P 500 Index at the time of selection.
- Rank the selected stocks within each universe on the following factors:
- Price to cash flow.
- Return on assets.
- 3, 6, and 12-month price appreciation.
- Select the 20 stocks within each universe with the best overall rankings. The domestic and
international equity universes are subject to a maximum of four stocks from any one of the
major GICS® market sectors. The financials and real estate sectors are combined for the sector
limit purpose. If a universe has less than 20 eligible securities, all eligible securities are selected.
- The universes are approximately weighted as shown below. Stocks are approximately equally
weighted within their universe.
- 40% domestic equity.
- 40% international equity.
- 20% REITs.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
||Average Annual Total Returns*
|Annual Total Returns
Past performance is no guarantee of future results and the actual current
performance of the portfolio may be lower or higher than the hypothetical performance
of the strategy. Hypothetical returns for the strategy in certain years were
significantly higher than the returns of the S&P 1500 Index. Hypothetical strategy
returns were the result of certain market factors and events which may not be
replicated in the future. You can obtain performance information which is current
through the most recent month-end by calling First Trust Portfolios L.P. at
1-800-621-1675 option 2. Investment return and principal value of the portfolio
will fluctuate causing units of the portfolio, when redeemed, to be worth more
or less than their original cost.
Simulated strategy returns are hypothetical, meaning that they do not represent actual trading, and, thus, may not reflect material
economic and market factors, such as liquidity constraints, that may have had an impact on actual decision making. The hypothetical
performance is the retroactive application of the strategy designed with the full benefit of hindsight. Strategy returns reflect a sales
charge of 1.85% and estimated annual operating expenses of 0.185%, plus organization costs, but not taxes or commissions paid by
the portfolio to purchase securities. Returns assume that all dividends received during a year are reinvested monthly. Actual portfolio
performance will vary from that of investing in the strategy stocks because it may not be invested equally in these stocks and may
not be fully invested at all times. It is important to note that the strategy may underperform the S&P 1500 Index in certain years and
may produce negative results.
The S&P 1500 Index is an unmanaged index of 1500 stocks representing the large cap, mid cap and small cap segments of the U.S. equity market. The index cannot be purchased directly by investors.
Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.
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 involved with owning common stocks,
such as an economic recession and the possible deterioration of
either the financial condition of the issuers of the equity
securities or the general condition of the stock market.
Certain of the securities in the portfolio are issued by Real Estate
Investment Trusts (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
An investment in a portfolio containing equity securities of foreign issuers is subject to additional risks,
including currency fluctuations, political risks, withholding, the lack of adequate financial information, and
exchange control restrictions impacting foreign issuers.
An investment in a portfolio containing small-cap and mid-cap
companies is subject to additional risks, as the share prices of small-cap
companies and certain mid-cap companies are often more
volatile than those of larger companies due to several factors,
including limited trading volumes, products, financial resources,
management inexperience and less publicly available information.
Large capitalization companies may grow at a slower rate than the overall market.
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 cybersecurity.
The COVID-19 global pandemic has resulted in major disruptions to economies and markets around the world. Financial markets have experienced extreme volatility and severe losses, negatively impacting global economic
growth prospects. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty and may exacerbate other political, social and economic risks.
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.
Although this unit investment trust terminates in approximately
15 months, the strategy is long-term. Investors should consider
their ability to pursue investing in successive portfolios, if
available. There may be tax consequences unless units are
purchased in an IRA or other qualified plan.