Limited Duration Fixed Income ETF Portfolio, Series 33
The Limited Duration Fixed-Income ETF Portfolio is a unit investment trust which invests in a broad range of exchange-traded funds (ETFs). The ETFs invest in U.S. and foreign fixed-income securities
which have limited durations.
This unit investment trust seeks current monthly income and capital appreciation;
however, there is no assurance that the objectives will be achieved.
Why Limited Duration?
- Limited duration ETFs provide investors with the potential for high income but with less interest rate
sensitivity. The duration of a bond is a measure of its price sensitivity to interest rate movements based
on the weighted average term to maturity of its interest and principal cash flows.
- Limited duration ETFs are typically diversified across several different segments of the fixed income
market. This multi-sector income approach primarily helps to reduce volatility and also has the potential
to enhance your returns because different sectors within the debt market often react differently to
economic and market changes.
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.
| 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 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 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 ETFs in which the portfolio invests may employ the
use of leverage, which increases the volatility of such funds.
Certain of the ETFs 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.
Certain of the ETFs 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 ETFs 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 ETFs 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 ETFs 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 rates decline.
Certain of the ETFs invest in preferred securities. Preferred securities are equity securities of the
issuing company which pay income in the form of dividends. Preferred securities are typically
subordinated to bonds and other debt instruments in a company’s capital structure, and
therefore will be subject to greater credit risk than those debt instruments.
Certain of the ETFs invest in senior loans. The yield on ETFs 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 ETFs invest in covenant-lite loans which contain fewer or no maintenance
covenants and may hinder the ETF’s ability to reprice credit risk and mitigate potential loss
especially during a downturn in the credit cycle.
Certain of the ETFs 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.
Certain of the ETFs invest in securities issued by foreign issuers which are subject to certain risks
including currency and interest rate fluctuations, political risks, withholding, the lack of adequate
financial information, and exchange control restrictions impacting foreign 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.
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.
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.
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