This is a passive income ETF that tracks an index made up of high-yield assets from several asset classes, including high-dividend stocks, REITs, preferred stocks, master limited partnerships, and high-yield bonds. It packs a variety of income assets into a single product in pursuit of high distribution income.

It suits income-oriented investors who want to diversify across a range of income assets at once while seeking high distribution income.

It is a passive (index-tracking) ETF managed by First Trust.

The ETF tracks an index built by combining high-yield assets from several asset classes, including high-dividend stocks, REITs, preferred stocks, master limited partnerships, and high-yield bonds, in set proportions. It spreads exposure across multiple income assets to pursue high distribution income in a single product, but it is also exposed to the interest rate, credit, and economic risks of each asset class at the same time.

• Diversified across multiple income asset classes
• Pursues high distributions in a single product

Assets under management (AUM) stand at $415.3M, and the expense ratio is 0.71% per year.

Compared with single-asset income ETFs and other multi-asset income ETFs such as INCM and IYLD, the main points of comparison are asset mix and distribution level.

Multi-asset income products are broadly influenced by interest rates, credit, asset prices, and risk appetite. They tend to be strong when risk appetite improves and weak when risk aversion grows. Because of their weighting in REITs, master limited partnerships, and high-yield bonds, they are fairly sensitive to the interest rate and economic environment.

Fund flows into multi-asset income products vary with the rate outlook, risk appetite, and demand for distribution income. Demand for diversified income in a single product can also draw money toward related product groups. It is also worth noting that performance varies with the conditions in each asset class.

Its strengths are diversification across multiple income assets and high distributions, while interest rate and credit sensitivity, economic risk, and simultaneous declines across asset classes are considerations.

For diversifying income through a basket of closed-end funds, PCEF is a direct substitute, and for diversifying through a stock and bond asset allocation, a product such as AOR is also worth comparing. For diversification across global multi-assets, a product such as GAL can also be considered. The three products shown in the table, INCM, IYLD, and FPEI, differ in asset mix, with an income focus, multi-asset income, and a preferred stock strategy, respectively. What sets this ETF apart is its diversified structure that bundles several income asset classes into a single product.

Here are the points to review before investing in MDIV. Multi-asset diversification and high distributions are attractive, but interest rate and credit sensitivity, economic risk, and simultaneous declines across asset classes need to be checked in advance. It is also a good idea to compare it with single-income and multi-asset income products.

A worsening interest rate and credit environment, an economic slowdown, and simultaneous declines across asset classes in risk-averse phases are the main variables for short-term performance, and if several high-yield assets weaken together, the diversification benefit can shrink. High distribution income comes with correspondingly high risk.

It is a suitable candidate for income-oriented investors who want to diversify across a variety of income assets at once. If you want to diversify through asset allocation, compare products such as AOR and GAL, and if you want high distributions from a bundle of several income assets, it is advisable to compare this product alongside them before choosing.