Second Line Capital Adds First Trust Enhanced Short Maturity ETF Shares

On Nov. 18, Second Line Capital, LLC disclosed a new position in First Trust Enhanced Short Maturity ETF (NASDAQ:FTSM), acquiring 120,501 shares valued at approximately $7.2 million.

• Added 120,501 shares, representing an estimated $7.24 million position increase
• Transaction equals 1.5% of 13F reportable assets under management
• New holding, which is outside the fund's top five positions

What happened

According to a filing with the Securities and Exchange Commission dated Nov. 18, Second Line Capital, LLC initiated a new position in First Trust Enhanced Short Maturity ETF (NASDAQ:FTSM) by acquiring 120,501 shares. The estimated value of the new holding was $7.2 million at quarter-end, based on SEC-reported data. The addition represents 1.5% of the fund’s 13F reportable assets under management.

What else to know

• It's a new position, accounting for 1.5% of Second Line Capital, LLC’s 13F reportable AUM after the filing.
• Top holdings after the filing:
  • NYSEMKT:ACIO: $53.12 million (approximately 11.0% of AUM)
  • NYSEMKT:DRSK: $37.30 million (approximately 7.7% of AUM)
  • NYSEMKT:IDUB: $30.95 million (approximately 6.4% of AUM)
  • NYSEMKT:SPDW: $24.96 million (approximately 5.2% of AUM)
  • NYSEMKT:ADME: $21.95 million (approximately 4.5% of AUM)
• As of Nov. 18, the shares were priced at $60.00, down 0.2% from the 52-week high.
• The one-year total return was approximately 4.7%, trailing the S&P 500 by more about 9.1 percentage points over the same period.
• The exchange-traded fund’s annualized dividend yield was approximately 4.4% as of Nov. 19.

Company overview

Company snapshot

First Trust Enhanced Short Maturity ETF (FTSM) is a short-duration fixed income ETF with a market capitalization of $6.17 billion. The fund’s strategy aims to provide a conservative risk profile and flexible cash alternative through diversified, high-quality holdings and active management in varying interest rate environments.

• Focuses on U.S. dollar-denominated fixed- and variable-rate debt securities
• Actively managed with an average duration under one year and average maturity below three years
• Targets investors seeking liquidity and higher yields than traditional money market funds

Foolish take

Second Line Capital's addition of First Trust Enhanced Short Maturity ETF represents a conservative investment. The ETF invests mostly in investment-grade securities, denominated in U.S. dollars, with short maturities.

The ETF had the largest allocation, 22.6%, to AAA-rated securities as of the end of November. Notably, it also had a significant portion of its assets invested in fixed-income securities rated BBB+ to BBB-. These securities accounted for 27.9% of assets.

Examining the fund's exposure to fixed-income sectors, the ETF invests across a wide range. Corporate bonds paying a fixed rate made up 46.7% of the assets. Commercial paper (20.8%) and asset-backed securities (16.1%) were also major sector holdings.

Overall, Second Line Capital has major investments in ETFs. These include those specializing in fixed income and equity.

Glossary

ETF (Exchange-Traded Fund): A fund that trades on stock exchanges and holds a basket of assets like stocks or bonds.

13F reportable assets: Assets disclosed by institutional investment managers in quarterly SEC Form 13F filings.

AUM (Assets Under Management): The total market value of assets an investment firm manages on behalf of clients.

Dividend yield: Annual dividends paid by an investment, expressed as a percentage of its current price.

Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.

Short-duration: Refers to bonds or funds with a low average maturity, reducing sensitivity to interest rate changes.

Variable-rate debt securities: Bonds or loans with interest payments that adjust periodically based on a benchmark rate.

Average maturity: The weighted average time until all securities in a portfolio mature.

Active management: An investment approach where managers make buy/sell decisions to outperform a benchmark, rather than tracking an index.

Cash alternative: Investments offering higher yields than cash or money market funds, while maintaining liquidity and low risk.

Liquidity: How quickly and easily an asset can be converted to cash without significantly affecting its price.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.