First Trust Securitized Plus ETF (DEED) seeks to track the performance of securitized debt instruments, including mortgage-backed securities, asset-backed securities, and collateralized mortgage obligations. This fixed-income ETF provides exposure to credit-sensitive bonds backed by pools of consumer loans, mortgages, and other receivables.
How It Works
DEED employs an actively managed approach to select securitized debt securities across various credit qualities and maturities. The fund's portfolio managers analyze credit risk, prepayment speeds, and interest rate sensitivity when constructing the portfolio. Holdings typically include agency and non-agency mortgage-backed securities, auto loan ABS, credit card receivables, and commercial mortgage-backed securities. Rebalancing occurs as needed based on market conditions and credit analysis.
Key Features
- Actively managed strategy allows tactical positioning across securitized debt sectors based on relative value opportunities
- 3.46% dividend yield provides attractive income potential from credit-sensitive fixed-income securities
- 0.00% expense ratio makes it cost-competitive among actively managed fixed-income ETFs during promotional period
Risks
- This ETF can lose value if interest rates rise significantly, as securitized bonds are sensitive to rate changes and could decline 5-15%
- Credit risk exists if underlying borrowers default on loans backing the securities, potentially causing permanent principal losses
- Prepayment risk occurs when borrowers refinance early, forcing reinvestment at potentially lower yields and reducing expected returns
Who Should Own This
Best suited for income-focused investors with 3-5 year time horizons seeking higher yields than Treasury bonds. Requires medium-to-high risk tolerance due to credit and interest rate sensitivity. Works as satellite holding (5-15% of fixed-income allocation) for investors comfortable with securitized debt complexity and active management approach.