First Trust Advisors L.P. Announces ETF Distributions
First Trust Advisors L.P. Announces Monthly Distributions for Exchange-Traded Funds
First Trust Advisors L.P. (“FTA”), a federally registered investment advisor, has declared the latest monthly distributions for select exchange-traded funds (ETFs) under its management. FTA serves as the investment advisor for these funds, bringing expertise in asset management across a range of investment products, including unit investment trusts, closed-end funds, mutual funds, and separately managed accounts. The firm, in conjunction with its affiliate First Trust Portfolios L.P. (“FTP”), a FINRA-registered broker-dealer, provides a wide array of investment services. As of January 31, 2025, FTA oversees approximately $266 billion in assets under management or supervision. Both FTA and FTP operate as privately held companies headquartered in Wheaton, Illinois.
Overview of Investment Risks
Investing in a fund comes with inherent risks, and past performance should not be viewed as an assurance of future returns. The market value of investments within a fund is subject to fluctuations, and investors may experience gains or losses upon selling shares. Importantly, fund shares are Announces not bank deposits and do not carry insurance or guarantees from the Federal Deposit Insurance Corporation (FDIC) or any other governmental entity.
Each fund’s investment strategy carries unique risks, detailed in its prospectus, shareholder reports, and regulatory filings. The valuation of fund shares Announces is influenced by market movements, interest rate changes, and economic conditions. Furthermore, ETFs may trade at a discount to their net asset value (NAV) and face potential delisting from exchanges if certain conditions are met.
Structural Considerations and Tax Implications
ETF shares can only be redeemed directly from a fund by authorized participants in large creation/redemption units. This structure affects liquidity and may lead to deviations from the NAV. Additionally, tax implications are an important consideration. Some funds distribute income that may be subject to federal and state alternative minimum tax (AMT), particularly for investors in higher tax brackets.
Market Volatility and Sector-Specific Risks
Market conditions can significantly impact the performance of funds. Various external factors, including government fiscal policies, regulatory changes, disruptions in financial markets, and global Announces events such as wars, pandemics, and economic recessions, can all contribute to investment risk. Certain funds may have a higher exposure to specific asset classes, regions, industries, or market capitalizations, which can amplify volatility.
Small- and Mid-Cap Stocks
Investments in small- and mid-capitalization companies often exhibit higher price volatility and lower liquidity compared to larger, well-established companies. While small-cap stocks have the potential for higher growth, they also carry greater risk due to market uncertainties.
Large-Cap Stocks
Large-cap companies may offer greater stability but could experience slower growth compared to smaller firms. Market trends and macroeconomic factors can also influence the performance of large-cap securities within a fund’s portfolio.
Tax Efficiency and Fund Distributions
Certain funds may opt to conduct cash-based rather than in-kind creations and redemptions, which can reduce their tax efficiency. Additionally, income distributions from a fund are not always guaranteed and can vary based Announces on the fund’s earnings. If a fund lacks sufficient income, it may be forced to reduce distributions. Furthermore, in some cases, distributions classified as a return of capital may occur due to transactions related to derivative positions or other portfolio management activities.
Operational and Cybersecurity Risks
Funds face operational risks, including potential cybersecurity breaches that could result in financial loss, regulatory penalties, reputational harm, and increased compliance costs. Additionally, funds rely on third-party service providers, such as custodians and administrators, and any disruption in these services may affect fund operations and investor returns.
FLEX Options and Derivative Risks
Some funds trade FLEX Options, which differ from direct investments in securities and carry distinct risks. These options may lack a liquid secondary market, potentially expiring worthless and causing significant losses. Similarly, the use of over-the-counter (OTC) derivatives, futures, swaps, and forward contracts exposes funds to market risks, counterparty risks, and price volatility.
Index Tracking and Diversification Considerations
Funds designed to track an index may not always perfectly match the performance of their respective benchmarks. This discrepancy arises from factors such as transaction costs, portfolio rebalancing, and tracking errors. Additionally, funds Announces classified as “non-diversified” may Announces concentrate a significant portion of assets in a limited number of issuers, increasing their vulnerability to adverse economic events affecting those issuers.
Funds with exposure to specific asset classes, industries, or geographic regions may experience heightened volatility compared to broadly diversified portfolios. Political and economic developments in emerging markets, currency fluctuations, and regulatory changes can further impact fund performance.
Exposure to International Markets
Investments in non-U.S. securities introduce additional risks, including foreign currency fluctuations, political instability, withholding taxes, and limited Announces availability of financial information. These risks may be more pronounced in emerging markets, where regulatory frameworks and market liquidity can be less developed compared to established economies.
Use of Fund-of-Funds Strategies
Some ETFs invest in shares of other funds, which introduces additional layers of expenses. Investors should be aware that fund-of-funds strategies can compound risks and costs associated with underlying holdings.
Licensing and Trademark Disclosures
First Trust Advisors L.P. operates under various licensing agreements with major financial index providers, including Nasdaq, Standard & Poor’s, and Cboe. While these indexes serve as benchmarks for specific funds, they are neither sponsored nor endorsed by the respective corporations. Additionally, the use of Target Outcome registered trademarks is licensed through Vest Financial LLC.
The trademarks “Dow Jones Industrial Average” and “Dow Jones Internet Composite Index℠” are registered by S&P Dow Jones Indices LLC (SPDJI) and licensed for use by First Trust. However, neither SPDJI nor its affiliates bear responsibility for the performance of related investment products.
Disclosures and Investment Guidance
FTA, as the investment advisor for First Trust funds, maintains an affiliate relationship with First Trust Portfolios L.P., which serves as the distributor Announces of these funds. Investors should review fund-specific materials, including the prospectus, for detailed information on fees, risks, and investment objectives.
It is important to note that this information is not intended as investment advice or a recommendation for any specific individual. Financial professionals are Announces encouraged to evaluate risks independently and exercise due diligence in advising clients on investment suitability.
