FT Short Duration Fixed Income Model Portfolio, 4th Quarter 2023
Interest rates remain low from a historical perspective, but the current environment has made it
challenging to invest for income. Because of the inverse relationship between interest rates and
bond prices, fixed-income investors may be concerned about when or if interest rates rise and the
affect that might have on their returns. Generally, when interest rates rise, bond prices decline and
vice versa. Using duration as a tool to manage risk may help mitigate the impact that rising rates
may have on returns. This is because short duration securities tend to be less sensitive to changes
in interest rates than securities with higher durations. The FT Short Duration Fixed Income Model
Portfolio consists of exchange-traded funds (ETFs) the majority of which are advised by First
Trust Advisors L.P., an affiliate of the trust’s sponsor. The ETFs included in the portfolio have been
selected by the First Trust Advisors Model Investment Committee through a dynamic approach by
targeting a duration of no more than three years. The portfolio seeks to provide less interest rate
sensitivity when compared to traditional core fixed income benchmarks over time.
What Is An ETF?
ETFs offer investors the opportunity to buy and sell an entire basket of securities with a single
transaction throughout the trading day. ETFs combine the characteristics of a mutual fund with
the convenience and trading flexibility of stocks. Below is a list of other ETF features.
Diversification | ETFs hold a basket of securities which helps to mitigate single security risk. It is
important to note that diversification does not guarantee a profit or protect against loss.
Transparency | ETF holdings are available daily so investors know what they own.
Tax Efficiency | The ETF structure allows for increased tax efficiency.
Fully Invested | Unlike a traditional mutual fund, ETFs do not need to hold cash in order to
satisfy investor redemptions which allows them to better adhere to their investment objective.
This unit investment trust seeks to provide current monthly income, with capital appreciation as a
secondary objective; however, there is no assurance the objectives will be met.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objective, 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 ETFs and fixed income securities.
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. Unlike
open-end funds, which trade at prices based on a current determination of the fund’s net asset value, ETFs
frequently trade at a discount from their net asset value in the secondary market.
Certain of the 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.
All of the 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 market or
investors’ perception thereof, possible downgrades and defaults of interest and/or principal.
Certain of the 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 funds invest in mortgage-backed securities. Rising interest rates tend to extend the
duration of mortgage-backed securities, making them more sensitive to changes in interest rates, and may
reduce the market value of the securities. In addition, mortgage-backed securities are subject to prepayment
risk, the risk that borrowers may pay off their mortgages sooner than expected, particularly when interest
Certain of the funds invest in senior loans. The yield on 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 when due.
Certain of the funds invest in covenant-lite loans which contain fewer or no maintenance covenants and
may hinder the funds’ ability to reprice credit risk and mitigate potential loss especially during a downturn
in the credit cycle.
Certain of the funds invest in U.S. Treasury obligations which are subject to numerous risks including higher interest rates, economic recession and deterioration of the bond market or investors’ perceptions thereof.
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-
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 cybersecurity.
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 as performance.
The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed,
there is no guarantee that vaccines will be effective against future variants of the disease.
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.
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.
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.
For a discussion of additional risks of investing in the trust see the “Risk Factors” section of the prospectus.