Investment Strategy

Investment Strategy

Blog Article

The investment strategy of FLCO focuses on generating income from a diversified portfolio of short-term debt securities while managing interest rate risk. The key aspects of its strategy include:

1. Short-Duration Focus

One of the primary characteristics of FLCO is its emphasis on short-duration bonds. Duration measures the sensitivity of a bond's price to interest rate changes—longer-duration bonds are more sensitive to interest rate hikes. FLCO minimizes this risk by investing in bonds with shorter maturities, which tend to be less affected by changes in interest rates. This makes FLCO a more stable option for income-seeking investors during periods of rising interest rates.

2. Diversification

The fund seeks to build a well-diversified portfolio of fixed-income securities across different sectors and asset classes. It invests in corporate bonds, government bonds, asset-backed securities (ABS), and mortgage-backed securities (MBS). This diversification helps spread risk and provides investors with a steady income stream from different sources.

3. Active Management

FLCO is actively managed by First Trust Advisors, meaning that the portfolio managers have the flexibility to adjust the fund’s holdings based on changing market conditions. The fund’s management team uses their expertise to select bonds with the best risk-return profile, taking into account interest rate trends, credit quality, and economic conditions.

4. Income Generation

The primary objective of FLCO is to provide investors with current income through dividends, which are typically paid on a monthly basis. By investing in high-quality, short-duration bonds, the fund aims to offer relatively stable income while maintaining a low risk profile. While the yield may vary depending on market conditions, the fund is designed to provide steady cash flow for income-focused investors. shutdown123