First Trust TCW Securitized Plus ETF (DEED)

Overview

The First Trust TCW Securitized Plus ETF (Ticker: TESC) is an actively managed ETF that seeks to provide investors with a diversified portfolio of securitized credit instruments. Its primary focus is on generating income and capital appreciation by investing in a broad range of asset-backed securities (ABS), mortgage-backed securities (MBS), and other securitized debt products. The investment strategy aims to exploit inefficiencies and opportunities within the securitized markets.

Reputation and Reliability

First Trust is a well-established ETF provider known for its diverse range of actively managed and index-tracking ETFs. TCW (Trust Company of the West) is a reputable asset management firm with extensive experience in fixed income and alternative investments, bringing significant expertise to the management of this ETF.

Management Expertise

The ETF is managed by TCW, which has a dedicated team of fixed-income professionals with deep experience in analyzing and managing complex securitized credit portfolios. Their expertise is crucial for navigating the intricacies of this specialized market.

Goal

The primary investment objective of the First Trust TCW Securitized Plus ETF is to seek current income and capital appreciation.

Investment Approach and Strategy

Strategy: This is an actively managed ETF, meaning it does not track a specific index. The portfolio managers aim to outperform relevant benchmarks through active security selection and strategic allocation within the securitized credit universe.

Composition The ETF primarily holds a diversified mix of securitized assets, including agency and non-agency residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and other asset-backed securities (ABS) backed by various types of collateral such as auto loans, credit card receivables, and student loans. It may also invest in other fixed-income securities and derivatives.

Market Share: Information on the precise market share of TESC within the broader securitized ETF sector is not readily available in public disclosures, as it is an actively managed fund with a specialized focus.

Total Net Assets (AUM): [object Object]

Key Competitors

• iShares MBS ETF (MBB)
• Invesco Mortgage-Backed Securities ETF (VMBS)
• Vanguard Mortgage-Backed Securities ETF (VMBS)
• SPDR Bloomberg Barclays Mortgage Backed Bond ETF (MBG)

Competitive Landscape

The securitized ETF market is dominated by passively managed ETFs that track broad mortgage-backed securities indices. Actively managed ETFs like TESC face competition from these larger, more liquid passive options. TESC's advantage lies in its active management strategy, which aims to identify alpha opportunities in specific securitized sectors that passive funds may not capture. However, its smaller AUM and potentially less liquid holdings compared to major passive ETFs could be a disadvantage.

Historical Performance: TESC has shown mixed historical performance, influenced by interest rate environments and the performance of its underlying securitized assets. Investors should review its performance data over various periods, including year-to-date, 1-year, 3-year, 5-year, and since inception, to understand its track record.

Benchmark Comparison: As an actively managed ETF, TESC's performance is typically compared against a relevant benchmark such as the Bloomberg U.S. Aggregate Bond Index or a specific securitized index. Its effectiveness is gauged by its ability to outperform these benchmarks net of fees.

Expense Ratio: [object Object]

Average Trading Volume

The average trading volume for TESC is generally moderate, indicating a reasonable level of liquidity for most investors.

Bid-Ask Spread

The bid-ask spread for TESC can vary but is typically within a range that is acceptable for long-term investors, though active traders may find it wider than more liquid ETFs.

Market Environment Factors

The performance of TESC is significantly influenced by interest rate movements, Federal Reserve policy, economic growth, inflation expectations, and the overall health of the housing and credit markets. Securitized products are sensitive to credit quality, prepayment speeds, and interest rate volatility.

Growth Trajectory

As an actively managed fund, TESC's growth trajectory is dependent on its ability to consistently generate attractive risk-adjusted returns. Changes to its strategy and holdings are at the discretion of the portfolio managers to adapt to evolving market conditions and seek opportunities.

Competitive Edge

TESC's competitive edge stems from its active management by TCW, a firm with specialized expertise in securitized credit. This allows the fund to potentially exploit inefficiencies in niche securitized markets and adapt its portfolio more dynamically than passive ETFs. The active approach can also allow for greater flexibility in navigating complex credit structures and credit risk management, aiming to deliver enhanced risk-adjusted returns in varying market conditions.

Volatility

TESC exhibits moderate to high volatility, which is characteristic of actively managed fixed-income ETFs, particularly those investing in non-agency MBS and ABS. Its volatility is influenced by interest rate changes and credit spreads.

Market Risk

The specific market risks associated with TESC's underlying assets include interest rate risk (bond prices fall when rates rise), credit risk (default risk of the underlying borrowers), prepayment risk (borrowers paying off mortgages or loans early), and liquidity risk (difficulty selling assets quickly without a significant price concession).

Ideal Investor Profile

The ideal investor for TESC is an individual or institution seeking current income and capital appreciation from diversified securitized credit exposures. They should have a moderate to high risk tolerance and a good understanding of fixed-income markets, particularly securitized products.

Market Risk

TESC is best suited for investors seeking an actively managed approach to the securitized market who are willing to accept a higher expense ratio for potential alpha generation. It can be a component of a diversified fixed-income portfolio for those looking for yield enhancement and diversification beyond traditional bonds.

The First Trust TCW Securitized Plus ETF (TESC) is an actively managed fund focused on securitized credit. Managed by TCW, it aims for income and capital appreciation through investments in MBS, ABS, and other securitized debt. While facing competition from passive ETFs, its active management offers potential advantages in navigating niche markets. Investors should be aware of its moderate to high volatility and associated market risks, making it suitable for those with a moderate to high risk tolerance seeking diversification in fixed income.

Data Sources:

• First Trust Investments Website
• TCW Website
• Financial Data Providers (e.g., Morningstar, Bloomberg)

Disclaimers:

This information is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Investors should consult with a qualified financial advisor before making any investment decisions. Data may be subject to change and may not be exhaustive.