First Trust has filed paperwork with the SEC for a “First Trust High Yield Long/Short ETF.” The First Trust High Yield Long/Short ETF primary investment objective is to provide current income. The Fund’s secondary investment objective is to provide capital appreciation. They did not specify a trading symbol or expense ratio in the initial filing.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest at least 80% of its net assets (plus the amount of any borrowing for investment purposes) in high yield debt securities that are rated below investment grade at the time of purchase or unrated securities deemed by the Fund’s Advisor to be of comparable quality, commonly referred to as “junk” bonds. Such securities may include U.S. and non-U.S. corporate debt obligations, bank loans and convertible bonds. For purposes of determining whether a security is below investment grade, the lowest available rating will be considered. Under normal market conditions, the Fund may invest up to 10% of its net assets in non-U.S. securities denominated in non-U.S. currencies. The Fund may invest in non-income producing securities including defaulted securities and common stocks; companies whose financial condition is troubled or uncertain and that may be involved in bankruptcy proceedings, reorganizations or financial restructurings. The Fund may also invest in investment grade corporate debt obligations and government securities to manage overall credit and duration risk.
As part of its investment strategy, the Fund intends to maintain both long and short positions in securities under normal market conditions. The Fund will take long positions in securities that the Advisor believes in the aggregate to have the potential to outperform the Fund’s benchmark, the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index (the “Index”). The Fund will take short positions in securities that the Advisor believes in the aggregate will underperform the Index. The Fund’s long positions may total up to 130% of the Fund’s Managed Assets (as defined below). The Fund’s short positions may total up to 30% of the Fund’s Managed Assets. “Managed Assets” means the average daily gross asset value of the Fund (which includes the principal amount of any borrowings), minus the sum of the Fund’s liabilities.
Under normal market conditions, the Fund will take short positions in U.S. Treasury securities and/or corporate debt obligations, which may be rated investment grade or non-investment grade. The Fund intends to use the proceeds from the Fund’s short positions to purchase high yield debt securities, thereby creating a form of financial leverage.
For the complete filing click: HERE