Trevor Bisset

Dec 17. 14:50

First Trust Registers the First Trust Real Assets Fund

First Trust Logo

The First Trust Real Assets Fund (the "Fund"), registered on 12/10/2021, has a salient investment objective: long-term real return through current income and long-term capital appreciation.

The Fund defines "real return" as total return after adjusting for inflation, which is currently sitting at 6.8% YoY as of November 2021, the fastest rate since 1982. Even the 10-year Treasury Inflation Protected Security (TIPS), explicitly designed as a government-backed inflation hedge, is delivering a real yield of roughly -1%.

First Trust Registers the First Trust Real Assets Fund

Defeating the purpose. Source: CNBC

The Fund has elected to pay monthly distributions at a flat rate of 5% annualized, meaning the capital appreciation component will be crucial in order to meet its objective. It will also have to ensure that it generates enough net investment income to pay out distributions without returning investor capital.

If successful, the Fund will serve as a welcome addition to the world of alternative investment products, as investors scramble to protect themselves from inflation without taking on excessive downside risk. The Fund seeks to achieve its objective by investing in 'real assets,' including real estate, infrastructure, natural resources like timber and agriculture/farmland, and precious metals.

The adviser, Chicago-based First Trust Capital Management (formerly Vivaldi Asset Management prior to a joint venture between Vivaldi Holdings and First Trust Capital Partners) has offered alternative investment products for more than two decades, spanning private equity, venture capital, hedge funds, real estate, and private credit. The offerings include two existing interval funds, with total AUM across all products topping $962 million.