Alternative Income Portfolio, Series 27
As interest rates remain low, these are challenging times to invest for income. Low yields in the traditional bond markets have led investors to look for yield from other sources. We believe that the
multi-asset income way of investing is one way to potentially provide income generation, diversification and the potential for reduced volatility.
The Alternative Income Portfolio is a unit investment trust that offers a disciplined and transparent solution for income investors by providing exposure to a diversified mix of asset classes in a single investment portfolio.
This unit investment trust seeks to provide current monthly income, with capital appreciation as a secondary objective. There is, however, no assurance that the objectives will be achieved. The portfolio terminates approximately two years from the initial date of deposit.
The portfolio invests in closed-end funds and common stocks in five distinct segments of the
market that we believe have the potential to provide a more stable income stream over various
Consider The Following:
- The portfolio provides the potential for a lower-risk total return alternative to investing solely in one asset class. The portfolio is further diversified within each asset class. However, diversification does not guarantee a profit or protect against loss.
- The portfolio may provide less interest rate sensitivity than traditional fixed income securities due to income being generated from multiple sources.
- Inflation causes interest rates to rise and erodes purchasing power. REITs, MLPs and dividend-paying securities are a few asset classes that have historically generated cash flow during times of rising inflation, although past performance is no guarantee of future results.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
The Alternative Income Portfolio invests in the following:
- Business Development Companies (BDCs) – Closed-end investment companies electing to be treated as BDCs that invest in and lend to private middle-market businesses.
- Closed-End Funds – Actively managed investment companies which invest in various types of securities. Closed-end funds issue shares that are traded on a securities exchange.
- Dividend-Paying Companies – Common stocks of companies that pay dividends to shareholders out of the companies' profits or expected profits.
- MLP CEFs – MLPs are limited partnerships that are publicly traded on a U.S. securities exchange,
which combine the tradeability of common stocks with the corporate structure of a limited
partnership. MLPs are traditionally high cash flow businesses that pay out a majority of that cash to
- REITs – Financial vehicles that pool investors' capital to purchase or finance real estate. REITs may concentrate their investments in specific geographic areas or in specific property types.
|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 involved with an investment in a portfolio of common stocks and closed-end funds.
Common stocks are subject to certain risks, 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.
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 may employ the use of leverage, which increases the volatility of such funds.
Certain of the securities in the portfolio are issued by closed-end
investment companies which have been elected to be treated as Business
Development Companies (BDCs). An investment in BDCs is subject to various risks,
including management’s ability to meet the BDC’s investment objective, and to
manage the BDC’s portfolio during periods of market turmoil. BDCs may trade in
the market at a discount to their net asset value. BDCs may employ the use of
leverage which subjects the BDC to increased risks.
Certain of the common stocks are issued by, and certain of the closed-end
funds invest in REITs. Companies involved in the real estate industry are
subject to changes in the real estate market, vacancy rates, competition,
volatile interest rates and economic recession.
Certain 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 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.
Certain of the closed-end funds invest in MLPs. Investments in MLPs are
subject to the risks generally applicable to companies in the energy and natural
resources sectors, including commodity pricing risk, supply and demand risk,
depletion risk and exploration risk. U.S. taxing authorities could challenge the
trust’s treatment of the MLPs for federal income tax purposes. These tax risks
could have a negative impact on the after-tax income available for distribution
by the MLPs and/or the value of the trust’s investments.
Certain of the closed-end funds and certain of
the common stocks invest in securities issued
by foreign issuers. An investment in a portfolio
which includes securities issued by foreign
entities should be made with an
understanding of the additional risks involved,
including 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.
Certain of the 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
("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
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.
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.
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.
For a discussion of additional risks of investing in the trust see the “Risk
Factors” section of the prospectus.
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
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.