The First Trust Barclays Edge Index (the "Index") is a multi-asset, target volatility index. The index targets exposure to companies with high quality attributes, strong fundamentals, lower volatility and above-average dividend yields while aiming to control risk by targeting 7% volatility. The Index seeks to provide exposure to both equity and fixed income components through an optimized, volatility control methodology. The equity exposure will be an equally-weighted blend of The Capital Strength Index and the Value Line® Dividend Index. The fixed income exposure will be a blend of the Barclays US 2yr Treasury Futures Index, the Barclays US 5yr Treasury Futures Index, and the Barclays US 10yr Note Futures Index. Refer to the Additional Information section and the Index Methodology Rule Book (see Documents link) for a full description of the Index methodology, including details regarding the optimization and volatility control components.
| Index Performance * | 3 Month | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception† |
|---|---|---|---|---|---|---|---|
| First Trust Barclays Edge Index | -0.80% | 0.03% | 5.37% | N/A | N/A | N/A | -0.73% |
| Index Performance * | 3 Month | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception† |
|---|---|---|---|---|---|---|---|
| First Trust Barclays Edge Index | 6.04% | 3.70% | 8.22% | N/A | N/A | N/A | 1.70% |
The First Trust Barclays Edge Index is designed to combine capital strength and value equity investment methodologies with a mix of US Treasury futures indexes for the potential to provide stable returns over time. The First Trust Barclays Edge Index consists of an equity component that combines stocks from the Capital Strength Index and the Value Line® Dividend Index. The Capital Strength Index starts with the largest 500 companies in the NASDAQ US benchmark index and then reduces the selection universe by screening for companies that meet minimum criteria including cash and/or short-term investments on their balance sheets, low debt-to-market cap ratios and attractive return-on-equity. It then selects the top 50 names from this smaller universe based on low historical volatility. The Value Line Dividend Index starts with the universe of stocks published in its The Value Line Investment Survey publication and then selects those with a Value Line® Safety Rank of 1 or 2, with attractive dividends and market cap of one billion dollars or above. It then equally weights all stocks that meet those conditions (generally, around 160-200 stocks). The First Trust Barclays Edge Index then combines the stocks represented in The Capital Strength Index and the Value Line Dividend Index with an equal-weight assigned to each underlying index and rebalanced back to equal-weight on a monthly basis. Furthermore, since the index is on an excess return basis (i.e., it returns the index performance in excess of risk free rates), the risk free return is deducted from the equity underliers. The risk free rate used in this calculation is the U.S. Fed Funds Rate published by the Federal Reserve of New York (ticker: FEDL01) for each day divided by 360 as outlined in the Index Rulebook. No such adjustment is needed to the US Treasury futures indexes as these securities returns are naturally on an excess return basis.
The Index uses an optimizer to evaluate its exposure to stocks and US Treasury futures indexes on a daily basis to target a 7% volatility level. This volatility control mechanism aims to target or limit the volatility of the index return over time by adjusting the exposure of the index constituents through a rules-based process called mean-variance optimization. The optimizer defines risk using both shorter and longer term measures of historical realized volatility. It then seeks to determine the allocations between the equity and US Treasury futures index that produce the highest expected return for the target volatility level, subject to constraints. Depending on the constraints of the optimizer at the time, the Index may or may not allocate to the US Treasury futures indexes. When the volatility measures are low, the index can have exposure greater than 100%. However, the optimizer is constrained such that the exposure can never be greater than 225%. Likewise, when volatility is high, the index exposure can be less than 100%. In addition, the First Trust Barclays Edge Index generally rebalances based on end-of-day values in the event there is a deviation in the index component weights of 10% or more, on an absolute basis, from the previous index rebalance value.
The performance of the First Trust Barclays Edge Index reflects the deduction of operating costs and rebalancing costs from the valuation of the underlying indexes. These costs, deducted as an annualized percentage on a daily basis, are fixed for the underlying indexes. The operating costs for the First Trust Barclays Edge Index range from 0.20% to 0.60%, and the rebalancing costs for the First Trust Barclays Edge Index range from 0.02% to 0.03%. The operating costs represent an estimate of the costs that would be incurred to buy and sell the index components. The rebalancing costs represent an estimate of the costs that would be incurred each time the Index rebalances due to changes in weightings of the Index components. The deduction of these costs occurs at the First Trust Barclays Edge Index level (i.e., the return on the First Trust Barclays Edge Index is reduced based on the applicable operating and rebalancing costs).
In addition to the information contained herein, refer to the Index Methodology Rule Book for a full description of the Index methodology, including details regarding the optimization and volatility control components.
FT Indexing Solutions LLC ("FTIS") defines various dates to assist our clients in providing transparency:
FTIS has retained Bloomberg Index Services Limited ("BISL" and with its affiliates, "Bloomberg") to act as the administrator and calculation agent of the Index. FTIS does not guarantee the timeliness, accurateness, or completeness of any such calculations.
Please refer to the methodology for the Index (the "Methodology") for more details about the Index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions of the Underlying Indexes, as well as all Index calculations.
This website does not constitute an offer of any services or financial products. Except for certain custom index calculation services, all information provided by FTIS is general in nature and not tailored to the needs of any person, entity or group of persons. FTIS receives compensation in connection with licensing its indices including the Index, to third parties and providing custom calculation services. It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable instruments offered by third parties that are based on that index.
FTIS does not sponsor, endorse, sell promote or manage any investment fund or other investment product or vehicle that seeks to provide an investment return based on the performance of the Index. FTIS is not an investment or tax advisor. FTIS makes no representation regarding the advisability of investing in any such investment fund or other investment product or vehicle. A tax advisor should be consulted to evaluate the impact of any tax consequences of making any particular investment decision based on the Index. Credit-related information and other analyses, including ratings, are generally provided by licensors.
Index returns or those of the Underlying Indexes shown do not represent the results of actual trading of investable assets or securities. FTIS or its affiliates maintains the Index but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the Index or investment funds, or financial products that are intended to track the performance of the Index. The imposition of these fees and charges would cause actual and back-tested performance of the securities, fund, or financial products to be lower than the Index performance shown. As a simple example, if an index returned 10% on a $100,000 investment for a 12-month period (or $10,000) and an asset-based management fee of 1.50% was imposed at the end of the period on the investment plus accrued interest (or $1,650), the net return would be 8.35%, or $8,350 for the 12-month period. Over a three-year period, an annual 1.50% management fee taken at year end with an assumed 10.00% return per year would result in a cumulative gross return of 33.10%, a total fee of $5,375 and a cumulative net return of 27.20% (or $27,200).
GENERAL DISCLAIMERS
The First Trust Barclays Edge Index ("FTIS Index") is a product of FT Indexing Solutions LLC ("FTIS") and is administered and calculated by Bloomberg Index Service Limited and its affiliates (collectively, "BISL"). FIRST TRUST® and First Trust Barclays Edge Index are trademarks of First Trust Portfolios L.P. (collectively, with FTIS and their respective affiliates, "First Trust"). The foregoing index and trademarks have been licensed for use for certain purposes by Bloomberg and certain other parties in connection with the FTIS Index.
The Capital Strength Index ("Nasdaq Index") is a product of Nasdaq, Inc. (collectively, with its affiliates, "Nasdaq"). NASDAQ®, CAPITAL STRENGTH INDEXTM, NQCAPSTTM, and NQCAPSTTTM are trademarks of Nasdaq. The foregoing index and trademarks have been licensed for use for certain purposes by FTIS in connection with the FTIS Index.
The Value Line Dividend Index ("Value Line Index") is a product of Value Line, Inc. ("Value Line"). VALUE LINE® and VALUE LINE DIVIDEND INDEXTM are trademarks or registered trademarks of Value Line. The foregoing index and trademarks have been licensed for use for certain purposes by FTIS in connection with the FTIS Index. The FTIS Index is not sponsored, endorsed, recommended, sold or promoted by Value Line and Value Line makes no representation regarding the advisability of investing in any product utilizing the FTIS Index.
BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. Bloomberg Finance L.P., BISL, and their affiliates ("Bloomberg") are not affiliated with First Trust or Barclays. Bloomberg's relationship to First Trust and Barclays is only (1) in the licensing of the FIRST TRUST®, BARCLAYS®, and FIRST TRUST BARCLAYS EDGE INDEXTM trademarks and (2) to act as the administrator and calculation agent of the FTIS Index, which is the property of FTIS. Bloomberg does not guarantee the timeliness, accurateness, or completeness of the FTIS Index or any data or information relating thereto and shall have no liability in connection with the FTIS Index or any data or information relating thereto.
The Barclays US 2Y Treasury Futures Index, Barclays US 5Y Treasury Futures Index, Barclays US 10Y Note Futures Index, and Barclays Switch USD Signal Index (collectively, the “Indices”), together with any Barclays indices that are components of the Indices, are trademarks owned by Barclays Bank PLC ("BB PLC") and its affiliates (collectively "Barclays"). The foregoing Indices and trademarks have been licensed for use for certain purposes by FTIS in connection with the FTIS Index.
First Trust, Barclays, Bloomberg, Nasdaq, Value Line, and their respective affiliates (collectively, the "Companies") do not make any representation regarding the advisability of investing in products based on the FTIS Index, Barclays Indices, Nasdaq Index, or Value Line Index, do not make any warranties or bear any liability with respect to such products, and do not make any warranties or bear any liability with respect to the FTIS Index or another party's index.
THE COMPANIES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS, COMPLETENESS, AND/OR UNINTERRUPTED CALCULATION OF THE FTIS INDEX, BARCLAYS INDICES, NASDAQ INDEX, VALUE LINE INDEX, OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATION WITH RESPECT THERETO, INCLUDING, ORAL, WRITTEN, OR ELECTRONIC COMMUNICATIONS. THE COMPANIES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS IN THE FTIS INDEX, BARCLAYS INDICES, NASDAQ INDEX, OR VALUE LINE INDEX OR PRODUCTS BASED ON THE FTIS INDEX, BARCLAYS INDICES, NASDAQ INDEX, OR VALUE LINE INDEX. THE COMPANIES MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY OWNERS OF PRODUCTS BASED ON THE FTIS INDEX, BARCLAYS INDICES, NASDAQ INDEX, OR VALUE LINE INDEX, OR BY ANY OTHER PERSON OR ENTITY FROM THE USE OF THE FTIS INDEX, BARCLAYS INDICES, NASDAQ INDEX, OR VALUE LINE INDEX, OR ANY DATA INCLUDED THEREIN.