First Trust Advisors has rolled out two new ETFs based on NASDAQ indices. The First Trust NASDAQ Technology Dividend Index Fund and the Multi-Asset Diversified Income Index Fund, which is based on the NASDAQ Multi-Asset Diversified Income Index, began trading Tuesday on NASDAQ.
The Multi-Asset Diversified Income Index Fund was created for investors looking for alternatives to the declining yields in the traditional bond markets. "With interest rates at historically low levels, income investors have been seeking yield from alternative sources, including multi-asset income investing," said Robert Carey, CFA, Chief Market Strategist at First Trust. "In our opinion, the Multi-Asset Diversified Income Index Fund is a disciplined and transparent solution for income investors that seeks to provide income generation, diversification and the potential for reduced volatility in a very challenging market."
The NASDAQ Multi-Asset Diversified Income Index is rebalanced quarterly to the following allocation: dividend paying equities (25%), REITs (20%), MLPs (20%), preferred securities (20%), high yield corporate bond ETF (15%). Each segment has its own set of eligibility criteria, and every security in the index is U.S.-listed and meets stringent eligibility criteria based on liquidity, size, volatility and yield.
The First Trust NASDAQ Technology Dividend Index Fund is designed for investors interested in dividend-paying technology companies. According to a recent Moody's report, the outlook for dividend growth from the technology sector is strong. Moody's projects the tech sector will pay out $26 billion in dividends in 2012. That's an increase of 14.3% from 2011 and higher than the 10.9% average annual growth of the prior four years. Technology dividend growth exceeds that of other sectors, according to the report. Indeed, technology dividends paid increased 16.49% on an annualized basis for the period from March 31, 2005 to April 17, 2012, according to NASDAQ OMX.
All securities included in the NASDAQ Technology Dividend Index must be listed on the NASDAQ Stock Market, New York Stock Exchange (NYSE) or NYSE Amex and classified as technology or telecommunications companies according to the Industry Classification Benchmark (ICB).
The index is evaluated semi-annually in March and September, and is rebalanced every quarter. During every evaluation, each stock is classified as a technology or telecommunications company based on its ICB designation. Technology and telecommunications securities are then given collective weights of 80 percent and 20 percent in the index, respectively. To limit high concentrations among larger stocks, the index utilizes caps.
First Trust provides a range of investment products and services including a family of 72 ETFs.
To celebrate the listing of the two new ETFs, Andrew C. Subramanian, Senior Vice President of First Trust, rang the NASDAQ opening bell this morning in New York.
Mary Schroeder writes for Securities Technology Monitor.