MutualFundWire.com: Eight Years In, a $159MM-AUM Fund Transforms

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Wednesday, November 29, 2023

Eight Years In, a $159MM-AUM Fund Transforms

The team at a Midwestern mutual fund firm recently converted an eight-year-old closed-end fund into an ETF, as expected.

Ryan O. Issakainen
First Trust Portfolios L.P.
Senior Vice President, ETF Strategist

The folks at First Trust Advisors L.P. [profile] confirmed that, on November 21, the First Trust Dynamic Europe Equity Income Fund (FDEU on the NYSE Arca) transformed into the First Trust Active Global Quality Income ETF (AGQI). The new, actively managed ETF is a series of First Trust Exchange-Traded Fund VIII.

FDEU's inception date was September 24, 2015, and it had an expense ratio of 110 basis points. Yet AGQI starts out with an expense ratio, 85bps, that is 25bps cheaper than its predecessor. And First Trust has built in fee breakpoints for future growth, with the ETF's expense ratio slated to fall to 82.875bps if it surpasses $2.5 billion in AUM, then to 80.75bps if it passes $5 billion, to 78.625bps if it passes $7.5 billion, and to 76.5bps if it passes $10 billion. As of market close yesterday, the fund had about $159 million in AUM.

Like with FDEU, First Trust serves as AGQI's investment advisor and Janus Henderson Investments US LLC [profile] serves as subadvisor. The PM team continues to include Janus Henderson's Faizan Baig (portfolio manager) and Ben Lofthouse (head of global equity income), and it now also includes Janus Henderson's Charlotte Greville (associate PM). First Trust Portfolios L.P. serves as the ETF's distributor.

The First Trust team first unveiled the planned ETF conversion back in March, and shareholders approved the reorganization last month. Also last month, in light of the pending transformation, Special Opportunies Fund, Inc. (an activist closed-end fund managed by Bulldog Investors, LLP) dropped its lawsuit against FDEU's board of directors.

The CEF-to-ETF conversion did involve switching two providers for a third. Bank of New York Mellon Corporation took over as AGQI's administrator, custodian, dividend disbursing agent, fund accountant, and transfer agent. BNY Mellon succeeded Brown Brothers Harriman & Co. (BBH, FDEU's administrator, custodian, and fund accountant) and Computershare, Inc. (FDEU's transfer agent).

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