Correspondence 0001445546-23-006677 from FIRST TRUST EXCHANGE-TRADED FUND IV (CIK 0001517936)
FIRST TRUST EXCHANGE-TRADED FUND IV (CIK 0001517936)
Date: Oct. 12, 2023 · CIK: 0001517936 · Accession: 0001445546-23-006677
AI Filing Summary & Sentiment
File numbers found in text: 333-174332, 811-22559
Letter
VIA EDGAR CORRESPONDENCE United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: First Trust Exchange-Traded Fund IV (the “Trust”) File Nos. 333-174332; 811-22559
Dear Ms. Rowland:
This letter responds to your comments regarding the registration statement filed on Form N-1A for First Trust Exchange-Traded Fund IV (the “Trust”) with the staff of the Securities and Exchange Commission (the “Staff”) on August 9, 2023 (the “Registration Statement”). The Registration Statement relates to the First Trust Core Investment Grade ETF (the “Fund”), a series of the Trust. Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statement.
Comment 1 – General
The Staff reminds the Registrant and its management that they are responsible for the accuracy and adequacy of the disclosures, notwithstanding any review, comments, action or absence of action by the Staff. Where a comment is made in one location, it is applicable to all similar disclosures appearing elsewhere in the Registration Statement. Please ensure that corresponding changes are made to all similar disclosure.
Please provide responses to all of the Staff’s comments on EDGAR at least five days before the effective date of the Registration Statement.
Please also add the ticker to the Fund’s name within EDGAR.
Response to Comment 1
The Registrant confirms that corresponding changes made in response to the Staff’s comments have been made to any similar disclosure throughout the Registration Statement, that it will provide the Staff with a response letter in the form of correspondence at least five days before effectiveness and that it will change the Fund’s name on EDGAR prior to effectiveness.
Comment 2 – Principal Investment Strategies
The Staff notes the following disclosure set forth in the section entitled “Principal Investment Strategies”:
The Fund’s Investment Portfolio includes only investment grade securities purchased by the Fund’s portfolio managers (the “Investment Portfolio”) and does not include uninvested cash or any other Fund asset unconnected to the Fund’s intended portfolio, including, but not limited to, accounts receivable or assets received as part of an issuer workout.
Please strike disclosure regarding what the “Investment Portfolio” does not include, as this is a “negative strategy,” which Instruction 3 to Item 9 of Form N-1A instructs registrants not to include in disclosure relating to its principal investment strategies.
Response to Comment 2
The Registrant respectfully declines to revise the disclosure as requested by the Staff. The Registrant believes that the referenced disclosure is not a “negative strategy” as described under Instruction 3 to Item 9 of Form N-1A (e.g., a strategy not to invest in a particular type of security or not to borrow money). The referenced disclosure is a description of which of the assets held by the Fund are included in the definition of its “Investment Portfolio” for purposes of its principal investment strategies.
Comment 3 – Principal Investment Strategies
In either the section entitled “Principal Investment Strategies” or “Additional Information on the Fund’s Investment Objective and Strategies,” please add disclosure that for purposes of compliance with Rule 35d-1 of the 1940 Act, as it relates to the Fund’s investments in investment grade securities, that the Fund will look through any underlying ETFs held by the Fund to that underlying ETF’s portfolio holdings.
Response to Comment 3
Pursuant to the Staff’s comment, the following disclosure has been added to the section entitled “Additional Information on the Fund’s Investment Objective and Strategies”:
For purposes of compliance with the Name Policy, the Fund will consider, to the extent practicable, the holdings of any underlying ETF in which it invests.
-2-
Comment 4 – Principal Investment Strategies
The Staff notes the following disclosure set forth in the section entitled “Principal Investment Strategies”:
The Fund’s Investment Portfolio is composed of securities issued by the U.S. government or its agencies, instrumentalities or U.S. government-sponsored entities; Treasury Inflation Protected Securities (“TIPS”); residential and commercial mortgage-backed securities; asset-backed securities; U.S. corporate bonds; fixed income securities issued by non-U.S. corporations and governments, including issuers with significant ties to emerging market countries; municipal bonds; and collateralized loan obligations (“CLOs”).
Please consider adding disclosure to further clarify that the Fund may invest in sovereign debt securities.
Additionally, if the Fund will have material exposure to any municipal securities issued by territories experiencing financial distress (such as Puerto Rico), please identify such jurisdiction in the section entitled “Principal Investment Strategies” and add relevant risk disclosure in the section entitled “Principal Risks.”
Lastly, please also add disclosure in the section entitled “Principal Investment Strategies” that the Fund may purchase securities on a when-issued, TBA, delayed delivery or forward commitment basis.
Response to Comment 4
Pursuant to the Staff’s comment, references to sovereign debt securities and securities issued on a when-issued, TBA, delayed delivery or forward commitment basis have been added to the section entitled “Principal Investment Strategies.” The Fund does not currently anticipate having material exposure to any municipal securities issued by territories experiencing financial distress. However, the Fund may have some exposure to Puerto Rican municipal securities and has added relevant risk disclosure to the section entitled “Non-Principal Risks.”
Comment 5 – Principal Investment Strategies
The Staff notes the following disclosure set forth in the section entitled “Principal Investment Strategies”:
The investment advisor employs a relative value approach that opportunistically allocates the Fund’s investments across the investment grade fixed income sub-sectors.
Please further explain what fixed income subsectors are contemplated. Does this mean all U.S. and non-U.S. investment grade fixed income investment sectors?
Response to Comment 5
Pursuant to the Staff’s comment, the disclosure has been revised to indicate that the Fund will invest in U.S. investment grade fixed income sub-sectors.
-3-
Comment 6 – Principal Investment Strategies
In the section entitled “Principal Investment Strategies,” please include, in plain English, additional disclosure to further clarify the criteria the Advisor uses when selecting investments.
Additionally, the Staff notes that the use of “relative value” and “yield curve” are not plain English terms and asks that such disclosure be revised accordingly.
Response to Comment 6
Pursuant to the Staff’s comment, the following disclosure has been added to the section entitled “Principal Investment Strategies”:
The investment advisor determines which investments to buy and sell by employing a relative value approach, pursuant to which it judges each security’s risk-versus-reward characteristics against other securities, that opportunistically allocates the Fund’s investments across U.S. investment grade fixed income sub-sectors.
The Registrant respectfully declines to revise references to “yield curve” as this is a well-understood term in the realm of fixed income investing that constitutes plain English.
Comment 7 – Principal Investment Strategies
Please revise the section entitled “Principal Investment Strategies” to add further disclosure regarding how the Advisor decides when to sell investments.
Response to Comment 7
Pursuant to the Staff’s comment, the referenced disclosure has been revised accordingly, as set forth in Response to Comment 6.
Comment 8 – Principal Investment Strategies
If there are any criteria regarding the maturity of the Fund’s portfolio sought by the Advisor, please disclose it in the section entitled “Principal Investment Strategies.”
Response to Comment 8
The Fund’s Advisor does not currently intend to employ any criteria regarding the maturity of the Fund’s portfolio.
-4-
Comment 9 – Principal Investment Strategies
The Staff notes the following disclosure set forth in the section entitled “Principal Investment Strategies”:
Therefore, prices of debt securities with shorter durations tend to be less sensitive to interest rate changes than debt securities with longer durations.
In the section entitled “Principal Risks,” please add disclosure indicating that debt securities with higher duration are subject to a greater sensitivity to interest rates, which generally corresponds to higher levels of volatility and greater risk.
Response to Comment 9
Pursuant to the Staff’s comment, the following disclosure has been added as the penultimate sentence of “Principal Risks – Interest Rate Risk”:
Higher sensitivity to interest rates is generally correlated with higher levels of volatility and, therefore, greater risk.
Comment 10 – Principal Investment Strategies
Please supplementally confirm that any dividend and interest expenses incurred in connection with short sale transactions will be reflected in the fee table.
Response to Comment 10
The Registrant so confirms.
Comment 11 – Principal Risks
Please delete the following disclosure set forth in the first paragraph of the section entitled “Principal Risks”:
The order of the below risk factors does not indicate the significance of any particular risk factor.
The Staff also notes that the principal risks appear in alphabetical order. Please order the risks to prioritize the risks that are most likely to adversely affect the Fund’s net asset value, yield and total return.
-5-
Response to Comment 11
The Registrant respectfully declines to revise the disclosure as requested by the Staff. Ultimately, the Registrant has reached the same conclusion as many other industry participants and declines to make the requested revisions as it believes the disclosure is compliant with the requirements of Form N-1A. The Registrant continues to evaluate its approach to the ordering of risk factors in light of recent Securities and Exchange Commission guidance.
Comment 12 – Principal Risks
In the section entitled “Principal Risks – Derivatives Risk,” please consider removing all references to asset segregation requirements, if applicable.
Response to Comment 12
Pursuant to the Staff’s comment, the referenced disclosure has been revised accordingly.
Comment 13 – Principal Risks
In the section entitled “Principal Investment Strategies,” please disclose whether the Fund will invest in non-U.S. securities denominated in a non-U.S. dollar currency. If so, please add “Currency Risk” to the section entitled “Principal Risks.”
Response to Comment 13
The Fund does not currently intend to invest in securities denominated in a non-U.S. dollar currency.
Comment 14 – Principal Risks
In the section entitled “Principal Risks – Non-Agency Securities Risk,” the Staff notes the following disclosure:
Non-agency securities are typically traded “over the counter” rather than on a securities exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, the non-agency mortgage-related securities held by the Fund may be particularly difficult to value because of the complexities involved in assessing the value of the underlying loans.
Please add the following phrase to the referenced disclosure:
“…and the value of these securities can change dramatically over time.”
-6-
Response to Comment 14
Pursuant to the Staff’s comment, the referenced disclosure has been revised accordingly.
Comment 15 – Principal Risks
If the Fund will invest significantly in debt securities issued by entities located in the United Kingdom or other European countries, please add tailored risk language to that effect in the section entitled “Principal Risks.”
Response to Comment 15
The Fund does not currently intend to invest significantly in debt securities issued by entities located in the United Kingdom or other European countries.
Comment 16 – Principal Risks
The Staff notes the disclosure set forth in the section entitled “Principal Risks – Significant Exposure Risk.” If the Fund intends to invest significantly in a particular sector, industry, country or geographic region, please disclose that in the section entitled “Principal Investment Strategies,” along with corresponding risk disclosure in the section entitled “Principal Risks.”
Response to Comment 16
The Fund does not currently intend to invest significantly in a particular sector, industry, country or geographic region.
Comment 17 – Performance
Please supplementally disclose the broad-based securities market index that the Fund intends to utilize.
Response to Comment 17
The Fund’s broad-based securities benchmark will be the Bloomberg U.S. Aggregate Index.
-7-
Comment 18 – Additional Information on the Fund’s Investment Objective and Strategies
Please provide additional disclosure regarding the criteria the Advisor uses to purchase and sell portfolio investments.
Response to Comment 18
Pursuant to the Staff’s comment, the referenced disclosure has been revised accordingly.
Comment 19 – Fund Investments
The Staff notes the following disclosure set forth in “Fund Investments – Collateralized Loan Obligations”:
CLOs with underlying assets of non-performing, distressed or defaulted loans are not contemplated to comprise a significant portion of the Fund’s investments in CLOs.
The Staff notes that the Fund intends to invest 100% in investment grade debt securities. Please confirm the applicability of this disclosure or consider deleting.
Response to Comment
The referenced disclosure has been deleted.
Comment 20 – Fund Investments
The Staff notes the following disclosure set forth in “Fund Investments – Derivative Instruments”:
To the extent the Fund enters into derivatives transactions, it will do so pursuant to Rule 18f-4 under the 1940 Act. Rule 18f-4 requires the Fund to implement certain policies and procedures designed to manage its derivatives risks, dependent upon the Fund’s level of exposure to derivative instruments.
Please tailor this disclosure to the extent the Fund will invest in derivatives, such as if the Fund will be a “limited derivatives user.”
Response to Comment
The Registrant respectfully declines to revise the disclosure as requested by the Staff as the current disclosure is compliant with the requirements of Form N-1A. The meaning and consequence of the Fund’s classification of a “limited derivatives user” under Rule 18f-4 of the 1940 Act is not plain English and disclosure of such classification is not required by Form N-1A or Rule 18f-4.
-8-
Comment 21 – Additional Risks of Investing in the Fund
The Staff notes the following disclosure set forth in the section entitled “Additional Risks of Investing in the Fund – Valuation Risk”:
In addition, the value of the debt securities in the Fund’s portfolio may change on days or during time periods when shareholders will not be able to purchase or sell the Fund’s shares.
Please modify to make this disclosure applicable to the Fund’s investments in ETFs that hold debt securities.
Response to Comment
The Registrant respectfully declines to make the requested revision. The only ETFs in which the Fund intends to invest are those hold that highly liquid U.S. Government securities for which valuation risk does not constitute a principal risk.
Comment
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CORRESP
1
filename1.htm
Chapman and Cutler LLP
320 South Canal Street, 27th Floor
Chicago, Illinois 60606
T 312.845.3000
F 312.701.2361
www.chapman.com
October 12, 2023
VIA EDGAR
CORRESPONDENCE
Emily Rowland
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re:
First Trust Exchange-Traded Fund IV (the “Trust”)
File Nos. 333-174332; 811-22559
Dear Ms. Rowland:
This letter responds
to your comments regarding the registration statement filed on Form N-1A for First Trust Exchange-Traded Fund IV (the “Trust”)
with the staff of the Securities and Exchange Commission (the “Staff”) on August 9, 2023 (the “Registration
Statement”). The Registration Statement relates to the First Trust Core Investment Grade ETF (the “Fund”),
a series of the Trust. Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration
Statement.
Comment 1 – General
The Staff reminds
the Registrant and its management that they are responsible for the accuracy and adequacy of the disclosures, notwithstanding any review,
comments, action or absence of action by the Staff. Where a comment is made in one location, it is applicable to all similar disclosures
appearing elsewhere in the Registration Statement. Please ensure that corresponding changes are made to all similar disclosure.
Please provide responses
to all of the Staff’s comments on EDGAR at least five days before the effective date of the Registration Statement.
Please also add the
ticker to the Fund’s name within EDGAR.
Response to Comment 1
The Registrant confirms
that corresponding changes made in response to the Staff’s comments have been made to any similar disclosure throughout the Registration
Statement, that it will provide the Staff with a response letter in the form of correspondence at least five days before effectiveness
and that it will change the Fund’s name on EDGAR prior to effectiveness.
Comment 2 – Principal Investment Strategies
The Staff notes the
following disclosure set forth in the section entitled “Principal Investment Strategies”:
The Fund’s Investment Portfolio
includes only investment grade securities purchased by the Fund’s portfolio managers (the “Investment Portfolio”) and
does not include uninvested cash or any other Fund asset unconnected to the Fund’s intended portfolio, including, but not limited
to, accounts receivable or assets received as part of an issuer workout.
Please strike disclosure
regarding what the “Investment Portfolio” does not include, as this is a “negative strategy,” which Instruction
3 to Item 9 of Form N-1A instructs registrants not to include in disclosure relating to its principal investment strategies.
Response to Comment 2
The Registrant respectfully
declines to revise the disclosure as requested by the Staff. The Registrant believes that the referenced disclosure is not a “negative
strategy” as described under Instruction 3 to Item 9 of Form N-1A (e.g., a strategy not to invest in a particular type of security
or not to borrow money). The referenced disclosure is a description of which of the assets held by the Fund are included in the definition
of its “Investment Portfolio” for purposes of its principal investment strategies.
Comment 3 – Principal Investment Strategies
In either the section
entitled “Principal Investment Strategies” or “Additional Information on the Fund’s Investment Objective and Strategies,”
please add disclosure that for purposes of compliance with Rule 35d-1 of the 1940 Act, as it relates to the Fund’s investments in
investment grade securities, that the Fund will look through any underlying ETFs held by the Fund to that underlying ETF’s portfolio
holdings.
Response to Comment 3
Pursuant to the Staff’s
comment, the following disclosure has been added to the section entitled “Additional Information on the Fund’s Investment
Objective and Strategies”:
For purposes of compliance with the
Name Policy, the Fund will consider, to the extent practicable, the holdings of any underlying ETF in which it invests.
-2-
Comment 4 – Principal Investment Strategies
The Staff notes the
following disclosure set forth in the section entitled “Principal Investment Strategies”:
The Fund’s Investment Portfolio
is composed of securities issued by the U.S. government or its agencies, instrumentalities or U.S. government-sponsored entities; Treasury
Inflation Protected Securities (“TIPS”); residential and commercial mortgage-backed securities; asset-backed securities; U.S.
corporate bonds; fixed income securities issued by non-U.S. corporations and governments, including issuers with significant ties to emerging
market countries; municipal bonds; and collateralized loan obligations (“CLOs”).
Please consider adding
disclosure to further clarify that the Fund may invest in sovereign debt securities.
Additionally, if the
Fund will have material exposure to any municipal securities issued by territories experiencing financial distress (such as Puerto Rico),
please identify such jurisdiction in the section entitled “Principal Investment Strategies” and add relevant risk disclosure
in the section entitled “Principal Risks.”
Lastly, please also
add disclosure in the section entitled “Principal Investment Strategies” that the Fund may purchase securities on a when-issued,
TBA, delayed delivery or forward commitment basis.
Response to Comment 4
Pursuant to the Staff’s
comment, references to sovereign debt securities and securities issued on a when-issued, TBA, delayed delivery or forward commitment basis
have been added to the section entitled “Principal Investment Strategies.” The Fund does not currently anticipate having material
exposure to any municipal securities issued by territories experiencing financial distress. However, the Fund may have some exposure to
Puerto Rican municipal securities and has added relevant risk disclosure to the section entitled “Non-Principal Risks.”
Comment 5 – Principal Investment Strategies
The Staff notes the
following disclosure set forth in the section entitled “Principal Investment Strategies”:
The investment advisor employs a relative
value approach that opportunistically allocates the Fund’s investments across the investment grade fixed income sub-sectors.
Please further explain
what fixed income subsectors are contemplated. Does this mean all U.S. and non-U.S. investment grade fixed income investment sectors?
Response to Comment 5
Pursuant to the Staff’s
comment, the disclosure has been revised to indicate that the Fund will invest in U.S. investment grade fixed income sub-sectors.
-3-
Comment 6 – Principal Investment Strategies
In the section entitled
“Principal Investment Strategies,” please include, in plain English, additional disclosure to further clarify the criteria
the Advisor uses when selecting investments.
Additionally, the
Staff notes that the use of “relative value” and “yield curve” are not plain English terms and asks that such
disclosure be revised accordingly.
Response to Comment 6
Pursuant to the Staff’s
comment, the following disclosure has been added to the section entitled “Principal Investment Strategies”:
The investment advisor determines which
investments to buy and sell by employing a relative value approach, pursuant to which it judges each security’s risk-versus-reward
characteristics against other securities, that opportunistically allocates the Fund’s investments across U.S. investment grade fixed
income sub-sectors.
The Registrant respectfully
declines to revise references to “yield curve” as this is a well-understood term in the realm of fixed income investing that
constitutes plain English.
Comment 7 – Principal Investment Strategies
Please revise the
section entitled “Principal Investment Strategies” to add further disclosure regarding how the Advisor decides when to sell
investments.
Response to Comment 7
Pursuant to the Staff’s
comment, the referenced disclosure has been revised accordingly, as set forth in Response to Comment 6.
Comment 8 – Principal Investment Strategies
If there are any criteria
regarding the maturity of the Fund’s portfolio sought by the Advisor, please disclose it in the section entitled “Principal
Investment Strategies.”
Response to Comment 8
The Fund’s Advisor
does not currently intend to employ any criteria regarding the maturity of the Fund’s portfolio.
-4-
Comment 9 – Principal Investment Strategies
The Staff notes the
following disclosure set forth in the section entitled “Principal Investment Strategies”:
Therefore, prices of debt securities
with shorter durations tend to be less sensitive to interest rate changes than debt securities with longer durations.
In the section entitled
“Principal Risks,” please add disclosure indicating that debt securities with higher duration are subject to a greater sensitivity
to interest rates, which generally corresponds to higher levels of volatility and greater risk.
Response to Comment 9
Pursuant to the Staff’s
comment, the following disclosure has been added as the penultimate sentence of “Principal Risks – Interest Rate Risk”:
Higher sensitivity to interest rates
is generally correlated with higher levels of volatility and, therefore, greater risk.
Comment 10 – Principal Investment Strategies
Please supplementally
confirm that any dividend and interest expenses incurred in connection with short sale transactions will be reflected in the fee table.
Response to Comment 10
The Registrant so
confirms.
Comment 11 – Principal Risks
Please delete the
following disclosure set forth in the first paragraph of the section entitled “Principal Risks”:
The order of the below
risk factors does not indicate the significance of any particular risk factor.
The Staff also notes
that the principal risks appear in alphabetical order. Please order the risks to prioritize the risks that are most likely to adversely
affect the Fund’s net asset value, yield and total return.
-5-
Response to Comment 11
The Registrant respectfully
declines to revise the disclosure as requested by the Staff. Ultimately, the Registrant has reached the same conclusion as many other
industry participants and declines to make the requested revisions as it believes the disclosure is compliant with the requirements of
Form N-1A. The Registrant continues to evaluate its approach to the ordering of risk factors in light of recent Securities and Exchange
Commission guidance.
Comment 12 – Principal Risks
In the section entitled
“Principal Risks – Derivatives Risk,” please consider removing all references to asset segregation requirements, if
applicable.
Response to Comment 12
Pursuant to the Staff’s
comment, the referenced disclosure has been revised accordingly.
Comment 13 – Principal Risks
In the section entitled
“Principal Investment Strategies,” please disclose whether the Fund will invest in non-U.S. securities denominated in a non-U.S.
dollar currency. If so, please add “Currency Risk” to the section entitled “Principal Risks.”
Response to Comment 13
The Fund does not
currently intend to invest in securities denominated in a non-U.S. dollar currency.
Comment 14 – Principal Risks
In the section entitled
“Principal Risks – Non-Agency Securities Risk,” the Staff notes the following disclosure:
Non-agency securities are typically
traded “over the counter” rather than on a securities exchange and there may be a limited market for the securities, especially
when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, the non-agency mortgage-related
securities held by the Fund may be particularly difficult to value because of the complexities involved in assessing the value of the
underlying loans.
Please add the following
phrase to the referenced disclosure:
“…and the value of these
securities can change dramatically over time.”
-6-
Response to Comment 14
Pursuant to the Staff’s
comment, the referenced disclosure has been revised accordingly.
Comment 15 – Principal Risks
If the Fund will invest
significantly in debt securities issued by entities located in the United Kingdom or other European countries, please add tailored risk
language to that effect in the section entitled “Principal Risks.”
Response to Comment 15
The Fund does not
currently intend to invest significantly in debt securities issued by entities located in the United Kingdom or other European countries.
Comment 16 – Principal Risks
The Staff notes the
disclosure set forth in the section entitled “Principal Risks – Significant Exposure Risk.” If the Fund intends to invest
significantly in a particular sector, industry, country or geographic region, please disclose that in the section entitled “Principal
Investment Strategies,” along with corresponding risk disclosure in the section entitled “Principal Risks.”
Response to Comment 16
The Fund does not
currently intend to invest significantly in a particular sector, industry, country or geographic region.
Comment 17 – Performance
Please supplementally
disclose the broad-based securities market index that the Fund intends to utilize.
Response to Comment 17
The Fund’s broad-based
securities benchmark will be the Bloomberg U.S. Aggregate Index.
-7-
Comment 18 – Additional Information on the
Fund’s Investment Objective and Strategies
Please provide additional
disclosure regarding the criteria the Advisor uses to purchase and sell portfolio investments.
Response to Comment 18
Pursuant to the Staff’s
comment, the referenced disclosure has been revised accordingly.
Comment 19 – Fund Investments
The Staff notes the
following disclosure set forth in “Fund Investments – Collateralized Loan Obligations”:
CLOs with underlying assets of non-performing,
distressed or defaulted loans are not contemplated to comprise a significant portion of the Fund’s investments in CLOs.
The Staff notes that
the Fund intends to invest 100% in investment grade debt securities. Please confirm the applicability of this disclosure or consider deleting.
Response to Comment
19
The referenced disclosure
has been deleted.
Comment 20 – Fund Investments
The Staff notes the
following disclosure set forth in “Fund Investments – Derivative Instruments”:
To the extent the Fund enters into derivatives
transactions, it will do so pursuant to Rule 18f-4 under the 1940 Act. Rule 18f-4 requires the Fund to implement certain policies and
procedures designed to manage its derivatives risks, dependent upon the Fund’s level of exposure to derivative instruments.
Please tailor this
disclosure to the extent the Fund will invest in derivatives, such as if the Fund will be a “limited derivatives user.”
Response to Comment
20
The Registrant respectfully
declines to revise the disclosure as requested by the Staff as the current disclosure is compliant with the requirements of Form N-1A.
The meaning and consequence of the Fund’s classification of a “limited derivatives user” under Rule 18f-4 of the 1940
Act is not plain English and disclosure of such classification is not required by Form N-1A or Rule 18f-4.
-8-
Comment 21 – Additional Risks of Investing
in the Fund
The Staff notes the
following disclosure set forth in the section entitled “Additional Risks of Investing in the Fund – Valuation Risk”:
In addition, the value of the debt securities
in the Fund’s portfolio may change on days or during time periods when shareholders will not be able to purchase or sell the Fund’s
shares.
Please modify to make
this disclosure applicable to the Fund’s investments in ETFs that hold debt securities.
Response to Comment
21
The Registrant respectfully
declines to make the requested revision. The only ETFs in which the Fund intends to invest are those hold that highly liquid U.S. Government
securities for which valuation risk does not constitute a principal risk.
Comment