First Trust has filed paperwork with the SEC for a “First Trust Global Tactical Asset Allocation and Income Fund.” The First Trust Global Tactical Asset Allocation and Income Fund’s investment objective is to seek total return and provide income while maintaining a consistent risk profile. They did not specify a trading symbol or expense ratio in the initial filing.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests in exchange-traded funds (“ETFs”) and exchange-traded notes (“ETNs”), which represent 15 to 25 unique asset classes. The Fund will also seek to generate an additional return stream by utilizing an option overlay strategy.
The Fund generally pursues its objective by seeking to control the level of projected volatility of the Fund by using a diversified portfolio of global asset classes, as represented by investable ETFs, ETNs, fixed income securities, equity securities, futures, commodity-linked notes and equity-linked notes. The investment weightings of the underlying funds are carefully controlled and dynamically rebalanced so that the expected risk level of the Fund is relatively stable. This dynamic weighting process, along with the portfolio manager’s qualitative insights, results in a disciplined investment process which is keyed off of the manager’s volatility forecasting process.
The option overlay strategy will seek to sell calls (overwrite) on a portion of the Fund’s holdings and supplement their respective yields. The number of holdings overwritten will be subject to the availability and liquidity of the underlying securities option market. The options sold will generally have a maturity of less than 180 days and be at-the-money or slightly out-of-money. The percentage of the overwrite will vary depending upon market conditions and the composition of the underlying period. However, the overwrite percentages on each individual security within the portfolio will be approximately pro-rata with the other securities that have liquid available options market. The strategy, at times, may sell call spreads rather than outright calls if the portfolio managers deem that it is more advantageous for the Fund. Additionally, at times, the call option allocation may differ substantially from a “pro-rata” allocation so that the expected volatility of the overall portfolio is maintained within the desired range. Depending upon the underlying asset on which the option is being written, the options utilized in the Fund’s portfolio may be exchange traded or over-the-counter (OTC).
For the complete filing click: HERE