First Trust launches First Trust New York Municipal High Income ETF
First Trust Advisors (First Trust), an exchange-traded fund (ETF) provider and asset manager, has launched a new actively managed ETF, the First Trust New York Municipal High Income ETF (NYSE Arca: FMNY).
The fund seeks to provide income that is exempt from regular federal, New York State and New York City income taxes with long-term capital appreciation as a secondary objective. The fund will seek to achieve its investment objectives by investing primarily in municipal debt securities issued by the state of New York.
“As investors prepare for the prospect of higher taxes, we believe demand for tax-free municipal bond ETFs may accelerate in the months ahead,” says Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust. “Our experienced municipal securities team at First Trust employs a rigorous, disciplined approach to managing risk, while seeking to capitalise on yield curve, industry weightings, and individual credit opportunities,” says Issakainen. The First Trust Municipal Securities Team applies both quantitative analysis and fundamental research to seek higher-yielding undervalued securities within the municipal market. In choosing the securities, the portfolio managers seek to take advantage of municipal market inefficiencies through an investment process that practices diligent credit analysis of individual issuers coupled with a thorough understanding of the major opportunities and risks within municipal sectors. They also apply a quantitative total return scenario analysis using multiple interest rate assumptions over different time horizons.
The First Trust Municipal Securities Team sees ample opportunities in municipal securities. In their view, credit fundamentals are improving for many municipal security issuers and taxable equivalent yields are attractive relative to other fixed income asset classes. Given the potential for interest rates to continue to rise as a result of stronger economic growth, the team believes that in the current market, the fund’s long-intermediate focus, coupled with including securities with lower investment grade ratings and high-yield bonds, may provide investors less interest rate sensitivity than longer duration portfolios.
Johnathan N Wilhelm, Senior Vice President and Tom Futrell, CFA, Senior Vice President at First Trust, serve as senior portfolio managers of the fund. The two will share responsibilities for the day‑to‑day management of the fund’s investment portfolio.