This is an actively managed ETF that seeks total return by investing an amount roughly equal to its net assets in convertible securities issued by US and international companies. Convertible securities are hybrid assets that offer both bond interest income and an option to convert into equity.

It suits moderate-risk investors who want the stability of bonds together with the upside potential of equities.

It is an ETF run by First Trust using an active management approach.

SSI Investment Management serves as sub-adviser, selecting securities from among US and international convertible bonds by analyzing factors such as credit quality and conversion premium. Given the nature of an asset class that combines bond and equity characteristics, the fund prioritizes active risk management over index tracking.

• Specializes in convertible securities, hybrid assets that combine bond and equity features
• Analyzes credit and conversion terms for each security through active management

Assets under management (AUM) are $73.9M, and the expense ratio is 0.95% per year.

It differs from peer convertible bond category ETFs in fees and management approach, and because it is actively managed, its cost structure may differ from that of passive products.

Given the nature of the convertible bond asset class, the value of the conversion option tends to come to the fore when equity markets rise, while the fund is also affected by changes in the interest rate and credit environment. Its volatility is somewhat higher than that of bond products.

Fund flows form in response to demand for both fixed-income-style income and equity-style growth potential, and interest tends to vary with changes in the interest rate environment.

Its strength is the hybrid bond and equity structure, which aims for downside protection and upside participation at the same time, while its weakness is the security-specific risk inherent in active management.

The peer convertible bond category includes passive index-tracking funds such as ICVT and CWB, which differ from FCVT in fee structure and management approach. Actively managed options include CVRT, ACVT, and MCVT, which allow you to compare the credit selection strategies of different managers. If you want pure high-yield bond exposure instead of convertible bonds, a corporate bond ETF such as HYG can also be an alternative.

Here are the points to review before investing in FCVT. It is worth confirming in advance the credit, interest rate, and management risks specific to an active convertible bond ETF, and it is also advisable to look at the dividend flow and issuer credit quality.

During periods of rising interest rates and deteriorating issuer credit, the bond-like characteristics come to the fore and the fund can face downward price pressure. Performance dispersion resulting from active management decisions is also a risk factor.

It is a suitable option for investors who want to approach convertible bonds, which combine bond and equity characteristics, through active management. Those who want purely passive convertible bond exposure are advised to compare ICVT and CWB.