First Trust Specialty Finance Fund Transitions to ETF Format

First Trust to Convert FGB into an ETF

First Trust Advisors L.P. (“FTA”) announced a major step for the First Trust Specialty Finance and Financial Opportunities Fund (NYSE: FGB). The fund’s Board of Trustees has approved converting FGB into the FT Confluence BDC & Specialty Finance Income ETF. Moving to an ETF structure will shift the fund to active management, which is intended to broaden how it can invest across the specialty finance space.

What the Conversion Means

This conversion, referred to as the Reorganization, is expected to be tax-free. In the transaction, all of FGB’s assets will be transferred to the newly formed ETF. In exchange, FGB shareholders will receive ETF shares whose value matches the value of the FGB shares they hold at the time of the Reorganization. The plan requires approval from FGB shareholders and must satisfy applicable regulatory conditions. While the goal is to complete the Reorganization in the coming year, the exact timing isn’t guaranteed and depends on those approvals.

2024 Shareholder Meeting

The Board of Trustees has also set the date for FGB’s 2024 annual meeting of shareholders. The meeting will take place at the offices of First Trust Advisors in Wheaton. Ahead of the meeting, shareholders will receive proxy materials with the agenda, proposals, and voting instructions. In connection with the annual meeting, a separate session will be held to address questions specifically about the Reorganization.

How FGB Invests Today

FGB is a diversified, closed-end management investment company. Its objective is to generate a high level of current income while also seeking total return. Under normal market conditions, the fund invests a large percentage of its Managed Assets in securities tied to the specialty finance sector. Confluence Investment Management LLC serves as the fund’s sub-advisor and selects investments with the aim of finding attractive income opportunities while leaving room for potential capital appreciation.

About First Trust Advisors

FTA is a federally registered investment advisor and oversees the investment strategy for FGB. Together with its affiliate, First Trust Portfolios L.P. (“FTP”), the firm offers a wide range of investment solutions. As of the end of August, FTA managed or supervised approximately $241 billion across exchange-traded funds, mutual funds, and closed-end funds. With that platform, FTA continues to develop and refine offerings designed for investors who seek both access and discipline.

About Confluence Investment Management

Confluence Investment Management is FGB’s investment sub-advisor. The firm’s team brings more than 500 years of combined industry experience to portfolio management and is focused on a repeatable, research-driven process. As of the end of July, Confluence oversaw in excess of $12.6 billion in assets, underscoring its depth in managing client capital.

What’s Next

This announcement marks a meaningful change in how the First Trust Specialty Finance and Financial Opportunities Fund will operate going forward. Shareholders and interested investors should watch for proxy materials that will provide updates, timelines, and voting details related to the Reorganization.

Frequently Asked Questions

Why is FGB being converted into an ETF?

The goal is to move FGB to an actively managed ETF structure, which is intended to provide more flexibility in managing the portfolio within the specialty finance sector while staying aligned with how many investors prefer to access the market today.

How will the Reorganization work for shareholders?

All of FGB’s assets will be moved to the new ETF in a transaction expected to be tax-free, and FGB shareholders will receive ETF shares equal in value to their current holdings. The plan is subject to shareholder approval and regulatory requirements.

When is the conversion expected to happen?

The target is to complete the Reorganization in the next year. That timeline isn’t guaranteed and depends on securing all necessary approvals.

Who will run the new ETF?

First Trust Advisors will manage the ETF, and Confluence Investment Management will serve as sub-advisor, the same team structure that supports FGB today.

What is FGB’s investment focus?

FGB seeks a high level of current income along with total return. Under typical market conditions, it invests at least 80% of its Managed Assets in securities within the specialty finance sector.

About The Author

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