First Trust Specialty Finance Fund Transitions to ETF Format

Author: Evelyn Baker Updated: 09-10-2024 04:13 PM

First Trust Announces Fund Conversion to an ETF

First Trust Advisors L.P. (“FTA”) has shared an exciting development regarding the First Trust Specialty Finance and Financial Opportunities Fund (NYSE: FGB). The Board of Trustees approved the conversion of FGB into the FT Confluence BDC & Specialty Finance Income ETF. This transformation represents a significant shift as it will allow the fund to be actively managed, enhancing its investment capabilities in the specialty finance sector.

Details of the Reorganization

The conversion, referred to as the Reorganization, is expected to be tax-free. In this process, all assets of FGB will be transferred to the newly established ETF, and shareholders will receive ETF shares equivalent to the value of their current shares. Approval from the FGB shareholders is necessary, along with compliance with regulatory requirements. While the Reorganization is targeted for completion in the upcoming year, there is no guarantee on the timing or whether all approvals will be secured.

Scheduled Shareholder Meeting

Moreover, the Board of Trustees has set the date for the 2024 annual meeting of shareholders for FGB. The meeting is scheduled to happen at the offices of First Trust Advisors in Wheaton. Shareholders will receive additional information in proxy materials leading up to the meeting. In conjunction with this meeting, a separate gathering will be arranged to discuss the Reorganization.

Investment Objectives of FGB

FGB is designed as a diversified closed-end management investment company with the goal of generating a high level of current income while also focusing on total returns. Under typical market conditions, the fund invests a large percentage of its Managed Assets in securities associated with specialty finance, carefully selected by Confluence Investment Management LLC, the fund’s sub-advisor. This investment strategy aims to capitalize on attractive income opportunities while fostering potential capital appreciation.

About First Trust Advisors

FTA operates as a federally registered investment advisor and guides the investment strategies of FGB. The firm, along with its affiliate First Trust Portfolios L.P. (“FTP”), provides a diverse array of investment services. As of the end of August, FTA manages or supervises approximately $241 billion across various investment vehicles, including exchange-traded funds, mutual funds, and closed-end funds. With a robust infrastructure, FTA continues to innovate and expand its offerings for investors.

Role of Confluence Investment Management

Confluence Investment Management plays an essential role as FGB’s investment sub-advisor. Their experienced team, boasting over 500 years of combined financial experience, strives to deliver proven performance in portfolio management. As of the end of July, Confluence managed assets exceeding $12.6 billion, highlighting their strength and reliability in the investment management field.

Looking Ahead

The announcement details the fundamental changes shaping the future of First Trust Specialty Finance and Financial Opportunities Fund. Stakeholders and potential investors are encouraged to stay informed through upcoming releases in proxy materials related to the Reorganization.

Frequently Asked Questions

What is the purpose of converting FGB into an ETF?

The conversion aims to provide enhanced management and investment opportunities while aligning with current market trends that favor flexible, actively managed investment vehicles.

When will the Reorganization take place?

The Reorganization is anticipated to occur during the next year, pending necessary approvals from shareholders and regulatory bodies.

What will happen to my shares of FGB?

Shareholders of FGB will receive shares in the new ETF equivalent to the value of their current holdings in FGB according to the terms of the Reorganization.

Who manages the new ETF?

The new ETF will be managed by First Trust Advisors and sub-advised by Confluence Investment Management, combining expertise to serve shareholder interests.

What investment strategy does FGB follow?

FGB focuses on generating income and total returns by investing at least 80% of its Managed Assets in securities within the specialty finance sector.

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