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First Trust Suite of Target Outcome ETFs® Surpass $2 Billion in Total Net Assets

·12-min read
  • The suite includes 30+ U.S. exchange-listed Target Outcome Investments®

  • 7 individual funds have each crossed $100 million in assets

  • The lineup recently expanded to include two new Target Income ETFs®, KNG and IGLD

First Trust Advisors L.P. ("First Trust"), a leading exchange-traded fund ("ETF") provider and asset manager, announced today that the suite of First Trust Cboe Vest Target Outcome ETFs® has surpassed $2 billion in total net assets.

The milestone highlights the successful relationship between First Trust, currently the second largest provider of actively managed funds in the U.S., and Cboe Vest, the asset management firm that started the revolution of packaging "defined outcome" or Target Outcome Investments® in 1940 Act funds.

The FT Cboe Vest Target Outcome ETF® suite has grown to include more than 30 funds, including both Target Outcome ETFs® ("buffer series") and Target Income ETFs®. First Trust’s Target Outcome ETF lineup now consists of buffer and deep buffer ETFs that reset on a monthly basis.

The buffer series are actively managed ETFs that are designed to help investors maintain a level of protection in down markets while taking advantage of growth opportunities in up markets (to a maximum cap). The funds seek to provide targeted market exposure to underlying ETFs ("reference assets") that are based on market indexes, while providing a defined downside buffer level, over a specific Target Outcome Period.

The Target Income ETFs® seek to provide a combination of income and growth potential. The income potential at an annualized level, before fees and expenses, is transparently defined for each unique underlier which creates the "target income" above its respective index yield. Growth potential is derived from price returns that are proportional to the price returns of the underlying reference asset.

"It’s gratifying to see what we started working to solve in 2012 – essentially devising a way to deliver the benefits of structured notes (i.e., targeted payoffs) without credit risk or liquidity issues – snowball into a robust category. Our commitment to seek to lead the industry in designing Target Outcome StrategiesTM and managing them with precision is unwavering," said Karan Sood, CEO of Cboe Vest and one of the portfolio managers for the funds.

"We are pleased with how strong the appetite for this relatively new category of ETFs has been, and we look forward to developing more innovative tools for investment professionals," said Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust.

The funds are managed and sub-advised by Cboe Vest Financial LLC ("Cboe Vest") using a "target outcome strategy" or pre-determined target investment outcome. The funds seek to provide targeted exposure to underlying ETFs, while providing predetermined investment outcomes that can remove some of the uncertainty associated with investing.

For more information about First Trust, please contact Ryan Issakainen at (630) 765-8689 or RIssakainen@FTAdvisors.com.

About First Trust

First Trust is a federally registered investment advisor and serves as the funds’ investment advisor. First Trust and its affiliate First Trust Portfolios L.P. ("FTP"), a FINRA registered broker-dealer, are privately held companies that provide a variety of investment services. First Trust has collective assets under management or supervision of approximately $186 billion as of March 31, 2021 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts. First Trust is the supervisor of the First Trust unit investment trusts, while FTP is the sponsor. FTP is also a distributor of mutual fund shares and exchange-traded fund creation units. First Trust and FTP are based in Wheaton, Illinois. For more information, visit www.ftportfolios.com.

About Cboe Vest:

Cboe Vest is the creator of Target Outcome Investments®, which strive to buffer losses, amplify gains or provide consistent income to a diverse spectrum of investors. Today, Cboe Vest’s Target Outcome StrategiesTM are available in mutual funds, exchange-traded funds (ETFs), unit investment trusts (UITs), collective investment trusts (CITs), and customizable managed accounts / sub-advisory services. For more information about Cboe Vest and the evolution of Target Outcome Investments®, visit www.cboevest.com or contact Linda Werner at lwerner@cboevest.com or 703-864-5483.

You should consider the funds’ investment objectives, risks, and charges and expenses carefully before investing. Contact First Trust Portfolios L.P. at 1-800-621-1675 or visit www.ftportfolios.com to obtain a prospectus or summary prospectus which contains this and other information about the funds. The prospectus or summary prospectus should be read carefully before investing.

Risk Considerations

The funds have characteristics unlike many other traditional investment products and may not be appropriate for all investors.

If the reference asset experiences gains during a target outcome period, certain funds will not participate in those gains beyond the cap. In the event an investor purchases fund shares after the first day of a target outcome period and the funds have risen in value to a level near to the cap, there may be little or no ability for that investor to experience an investment gain on their fund shares.

Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Market prices may differ to some degree from the net asset value of the shares. Investors who sell fund shares may receive less than the share’s net asset value. Shares may be sold throughout the day on the exchange through any brokerage account. However, unlike mutual funds, shares may only be redeemed directly from the funds by authorized participants, in very large creation/redemption units. If the funds’ authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a discount to the funds’ net asset value and possibly face delisting.

A fund’s shares will change in value, and you could lose money by investing in a fund. One of the principal risks of investing in a fund is market risk. Market risk is the risk that a particular security owned by a fund, fund shares or securities in general may fall in value. There can be no assurance that a fund’s investment objectives will be achieved. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future.

A fund may be a constituent of one or more indices which could greatly affect a fund’s trading activity, size and volatility.

Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.

Depositary receipts may be less liquid than the underlying shares in their primary trading market.

Stocks with growth characteristics tend to be more volatile than certain other stocks and their prices may fluctuate more dramatically than the overall stock market.

Large capitalization companies may grow at a slower rate than the overall market.

Mid capitalization companies may experience greater price volatility than larger, more established companies.

A fund with significant exposure to a single asset class, country, region, industry or sector may be more affected by an adverse economic or political development than a broadly diversified fund.

There can be no assurance that an active trading market for fund shares will develop or be maintained.

Certain of the funds do not invest directly in FLEX Options. Rather, they invest in a wholly-owned subsidiary, which will have the same investment objective as the funds, but unlike the funds, it may invest without limitation in FLEX Options. The subsidiary is not registered under the 1940 Act and is not subject to all the investor protections of the 1940 Act. Thus, the funds, as investors in the subsidiary, will not have all the protections offered to investors in registered investment companies.

The use of options and other derivatives can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives.

The funds may invest in FLEX Options that reference an ETF, which subjects the funds to certain of the risks of owning shares of an ETF as well as the types of instruments in which the reference ETF invests.

Because the funds may hold FLEX Options that reference the index and/or reference ETFs, the funds have exposure to the equity securities markets.

The FLEX Options held by the funds will be exercisable at the strike price only on their expiration date. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or other recognized pricing methods.

There can be no guarantee that a liquid secondary trading market will exist for the FLEX Options and FLEX options may be less liquid than exchange-traded options.

Certain funds’ investment strategy is designed to deliver returns that match the reference asset if a fund’s shares are bought on the day on which the fund enters into the FLEX Options (i.e., the first day of a target outcome period) and held for the entire target outcome period, subject to a pre-determined cap, or until those FLEX Options expire at the end of the target outcome period. If an investor does not hold its fund shares for an entire target outcome period, the returns realized by that investor may not match those a fund seeks to achieve. In the event an investor purchases fund shares after the first day of a target outcome period or sells shares prior to the expiration of the target outcome period, the value of that investor’s investment in fund shares may not be buffered against a decline in the value of the reference asset and may not participate in a gain in the value of the reference asset up to the cap for the investor’s investment period.

For certain funds, a new cap is established at the beginning of each target outcome period and is dependent on prevailing market conditions. As a result, the cap may rise or fall from one target outcome period to the next and is unlikely to remain the same for consecutive target outcome periods.

A fund that effects all or a portion of its creations and redemptions for cash rather than in-kind may be less tax-efficient.

A fund may be subject to credit, inflation, income, and interest rate risks. These risks could result in a decline in a security’s value and/or income, increased volatility as interest rates rise or fall and an adverse impact on the fund’s performance.

A fund may be subject to the risk that a counterparty will not fulfill its obligations which may result in significant financial loss to a fund.

As the use of Internet technology has become more prevalent in the course of business, the funds have become more susceptible to potential operational risks through breaches in cybersecurity.

The price of gold bullion can be significantly affected by international monetary and political developments. In addition, worldwide metal prices may fluctuate substantially over short periods of time, and as a result, a fund’s share price may be more volatile than other types of investments.

Securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government.

Commodity prices can have significant volatility, and exposure to commodities can cause the value of a fund’s shares to decline or fluctuate in a rapid and unpredictable manner.

Large inflows and outflows may impact a new fund’s market exposure for limited periods of time.

The funds intend to qualify as "regulated investment companies" ("RICs"), however, the federal income tax treatment of certain aspects of the proposed operations of the funds are not entirely clear. If, in any year, the funds fail to qualify as RICs under the applicable tax laws, the funds would be taxed as ordinary corporations.

The funds are classified as "non-diversified" and may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the funds may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers.

First Trust Advisors L.P. is registered as a commodity pool operator and commodity trading advisor and is also a member of the National Futures Association.

First Trust Advisors L.P. is the adviser to the funds. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the funds’ distributor.

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.

Cboe® is a registered trademark of Cboe Exchange, Inc., which has been licensed for use in the name of the funds. The funds are not sponsored, endorsed, sold or marketed by Cboe Exchange, Inc. or any of its affiliates ("Cboe") or their respective third-party providers, and Cboe and its third-party providers make no representation regarding the advisability of investing in the funds and shall have no liability whatsoever in connection with the funds.

Target Outcome Investments, Target Outcome ETFs and Target Income ETF are registered trademarks of Cboe Vest Financial.

Target Income Investments, Target Income Strategy and Target Outcome Strategies are trademarks of Cboe Vest Financial.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210420005744/en/

Contacts

Ryan Issakainen
First Trust
(630) 765-8689
RIssakainen@FTAdvisors.com