SEC Company Response from FIRST TRUST EXCHANGE-TRADED FUND VIII (CIK 0001667919) — Mar 30, 2020
FIRST TRUST EXCHANGE-TRADED FUND VIII (CIK 0001667919)
Date: March 30, 2020 · CIK: 0001667919 · Accession: 0001445546-20-001689
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File numbers found in text: 333-210186, 811-23147
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CHAPMAN AND CUTLER LLP
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
March 30,
2020
VIA EDGAR CORRESPONDENCE
Scott Lee
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re:
First
Trust Exchange-Traded Fund VIII (the “Trust”)
File Nos. 333-210186; 811-23147
Dear Mr. Lee:
This letter
responds to your comments, provided by telephone on March 6, 2020, regarding the registration statement filed on Form N-1A
for First Trust Exchange-Traded Fund VIII (the “Trust”) with the staff of the Securities and Exchange Commission
(the “Staff”) on January 21, 2020 (the “Registration Statement”). The Registration
Statement relates to the First Trust TCW Securitized Plus 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
Please provide
the ticker symbol for the Fund.
Response to Comment 1
Pursuant to
the Staff’s request, the ticker symbol will be “DEED.”
Comment 2 – General
Please confirm
whether the Fund intends to include the legend described by Rule 30e-3 of the Investment Company Act of 1940, as amended (the “1940
Act”).
Response to Comment 2
The Fund does
not currently intend to include the legend described by Rule 30e-3 of the 1940 Act.
Comment 3 – Fees and Expenses of the
Fund
Please include
in correspondence a completed fee table and updated examples for the Fund.
Response to Comment 3
Pursuant to
the Staff’s request, a completed fee table and updated examples for the Fund has been set forth on Exhibit A in this
response.
Comment 4 – General
Please provide
all missing and bracketed information in the Fund’s next filing with the Commission.
Response to Comment 4
Pursuant to
the Staff’s request, all missing and bracketed information will be included in the Fund’s next amendment to the Registration
Statement.
Comment 5 – General
The Staff requests
that the Fund respond to all comments in correspondence at least five business days prior to the effective date of the filing.
The Staff also notes that the Fund and its management are responsible for the accuracy and adequacy of all disclosures notwithstanding
any review, comment, action or absence of action by the Staff and asks the Fund to please note that where a comment is made in
one section of the Registration Statement, such comment is applicable to all similar disclosures appearing elsewhere in the Registration
Statement.
Response to Comment 5
Pursuant to
the Staff’s request, the Fund has provided responses to all of the Staff’s comments herein which has been filed at
least five business days prior to effectiveness of the Registration Statement. The Fund confirms that revisions made in accordance
with the Staff’s comments have been applied to similar disclosure throughout the Registration Statement.
Comment 6 – Fees
and Expenses of the Fund
Please confirm
that the contractual waiver of management fees will have a termination date at least one year from the effectiveness of the Registration
Statement. Please note that if the contractual waiver can be terminated by a party other than the Trust’s Board of Trustees
(the “Board”), it may not be reflected in the section entitled “Annual Fund Operating Expenses”
and may not be included in the Expense example.
Response to Comment 6
The Fund confirms
that the contractual waiver of management fees will have a termination date at least one year from the effectiveness of the Registration
Statement and that this contractual waiver cannot be terminated by anyone other than the Board.
Comment
7 – Principal Investment Strategies
Please confirm
the Fund’s understanding that to the extent the Fund includes any derivatives positions in connection with complying with
the 80% investment strategy set forth in the section entitled “Principal Investment Strategies,” such positions must
be valued on a mark-to-market basis.
Response to Comment 7
The Fund confirms
that the Fund includes any derivatives positions in connection with complying with the 80% investment strategy set forth in the
section entitled “Principal Investment Strategies,” such positions will be valued on a mark-to-market basis.
Comment 8 – Principal
Investment Strategies
Please supplement
or revise the disclosure set forth below to clarify what is meant by “a full market cycle” and a “superior risk/reward
profile” (i.e. is it based on a percentage, dollar amount, etc.) in plain English.
The Fund’s investment sub-advisor,
TCW Investment Management Company LLC (“TCW” or the “Sub-Advisor”), seeks to outperform the
Bloomberg Barclays U.S. Mortgage-Backed Securities Index over a full market cycle through the utilization of independent,
bottom-up research to identify securities that are undervalued and that offer a superior risk/reward profile.
Response to Comment 8
Pursuant to
the Staff’s request, the following disclosure is set forth as the third sentence of the first paragraph of the section entitled
“Principal Investment Strategies”:
The Fund’s investment sub-advisor,
TCW Investment Management Company LLC (“TCW” or the “Sub-Advisor”), seeks to outperform the
Bloomberg Barclays U.S. Mortgage-Backed Securities Index over time through the utilization of independent, bottom-up research to
identify securities that are relatively undervalued.
In addition,
the following disclosure is set forth as the first paragraph of the section entitled “Additional Information on the Fund’s
Investment Objectives and Strategies – Additional Information About the Fund’s Strategy”:
TCW seeks to outperform the Bloomberg
Barclays U.S. Mortgage-Backed Securities Index over a full market cycle through the utilization of independent, bottom-up research
to identify securities that are undervalued and that offer a superior risk/reward profile. A full market cycle refers to the observation
that the world economy is characterized by an integrated credit, asset price and business cycle. The top end of cycle becomes evident
when credit underwriting is at historically “loose” standards, global and domestic equity prices have advanced at a
much faster rate than nominal GDP, and business revenue and CapEx spending begins to slow after a multi-year rise at a faster than
historical pace. The bottom of the cycle occurs when the opposite to the top end of the cycle occurs and is observable in economic
statistics. A security’s risk/reward profile is its potential return relative to its potential return volatility under various
stages of the market cycle. Potential return volatility can be defined by amount of dispersion of the returns of a security or
benchmark over various time periods. Typically, investors require higher expected returns for asset, securities, or benchmark that
are anticipated to have higher volatility. An undervalued security has a risk/reward profile which we believe to be superior to
the risk/reward profile of similar assets in the fixed income markets.
Comment 9 – Principal
Investment Strategies
The Staff notes
that it appears that the Fund may invest significantly in below investment grade bonds (i.e. “junk bonds”).
Given the general liquidity profile of these investments, please explain how the Fund determines that its investment strategy is
appropriate under Rule 22e-4 of the 1940 Act.
Response to Comment 9
The Fund makes
such determinations pursuant to its liquidity risk management program that complies with Rule 22e-4 of the 1940 Act.
Comment 10 – Principal
Investment Strategies
Please review
the Fund’s principal investment strategies and principal risk disclosures to ensure that the information is not too generic
or standardized and please describe the actual derivatives instruments and the associated principal risks that the Fund intends
to use to achieve its investment objective. See Letter from Mr. Barry Miller, Associate Director, Office of Legal and Disclosure
to Ms. Karrie McMillan, General Counsel, Investment Company Institute (July 30, 2010) (the “Derivatives Letter”).
Response to Comment 10
Pursuant to
the Staff’s request, the Fund confirms its belief that its disclosure is consistent with the guidance set forth in the Derivatives
Letter.
Comment 11 – Principal
Risks
Please provide
corresponding principal risk disclosure for non-listed derivatives that trade “over-the-counter.”
Response to Comment 11
Pursuant to
the Staff’s request, the Fund has included disclosure entitled “OTC Derivatives Risk” in the sections entitled
“Principal Risks” and “Additional Risks of Investing in the Fund.”
Comment 12 – Principal
Risks
The Staff notes
that the Principal Risks are listed in alphabetical order and asks the Fund to please revise the order in which risks are disclosed
to prioritize those that are most likely to adversely affect the Fund’s net asset value, yield and total return in accordance
with the Staff’s guidance in ADI 2019-08 – Improving Principal Risks Disclosure.
Response to Comment 12
The Fund respectfully
declines to revise the disclosure as requested by the Staff. Ultimately, the Fund 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.
Comment 13 – Principal
Risks
The Staff notes
the disclosure in the section entitled “Principal Investment Strategies” that the Fund may “invest up to 10%
of its total net assets in non-US dollar denominated securities” and asks the Fund to please consider including currency
risk and foreign securities risk in the section entitled “Principal Risks.”
Response to Comment 13
As of the date
set forth on this correspondence, the Fund’s investment sub-advisor expects the Fund’s typical exposure to securities
dominated in non-US dollars to be less than 5% of the total net assets of the Fund. Accordingly, the Fund respectfully declines
to revise the section entitled “Principal Risks” to include disclosure currency risk or foreign securities risk.
Comment 14 – Principal
Risks
Please consider
labeling the “Mortgage-Related Securities Risk” as “Mortgage-Backed Securities Risk” because the prospectus
specifically identifies “Asset-Backed Securities Risk” and “CLO Risk” which are the other asset classes
identified in the first paragraph of the section entitled “Principal Investment Strategies.”
Response to Comment 14
The Fund respectfully
declines to make the requested revisions to the titles of the aforementioned risks.
Comment 15 – Principal
Risks
Please define
“TBA” in “TBA Transactions Risk” in the section entitled “Principal Risks.”
Response to Comment 15
Pursuant to
the Staff’s request, the first sentence of “TBA Transactions Risk” has been revised as set forth below:
The Fund may purchase securities
via to-be-announced transactions (“TBA Transactions”).
Comment 16 – Management
Please revise
the disclosure set forth below to indicate the month upon which the portfolio managers began their service to the Fund.
Each portfolio manager has served
as a part of the portfolio management team of the Fund since 2020.
Response to Comment 16
Pursuant to
the Staff’s request, the disclosure has been revised accordingly.
Comment 17 – Additional
Information on the Fund’s Investment Objective and Strategies
Please consider
disclosing the “Non-Principal Investments” in the Fund’s Statement of Additional Information rather than in the
Fund’s prospectus.
Response to Comment 17
The Fund respectfully
declines to make the requested revisions as it believes the disclosure is compliant with the requirements of Form N-1A.
Comment 18 – Fees
and Expenses of the Fund
If the Fund
invests in other investment companies, please confirm that acquired fund fees and expenses of greater than 0.01% of average net
assets of the Fund will be included in the table entitled “Annual Fund Operating Expenses.”
Response to Comment 18
Pursuant to
the Staff’s request, to the extent that the acquired fund fees and expenses incurred by the Fund are greater than 0.01% of
average net assets of the Fund, the Fund confirms that such expenses will be included in the table entitled “Annual Fund
Operating Expenses.”
Comment 19 – Federal
Tax Matters
Please define
the term “PFICs” in the section entitled “Federal Tax Matters.”
Response to Comment 19
The Fund respectfully
declines to make such revisions as “PFICs” is defined in the first sentence of the section entitled “Federal
Tax Matters – Investments in Certain Foreign Corporations,” reproduced below:
If the Fund holds an equity interest
in any “passive foreign investment companies” (“PFICs”), which are generally certain foreign corporations
that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties
or capital gains) or that hold at least 50% of their assets in investments producing such passive income, the Fund could be subject
to U.S. federal income tax . . .
Comment 20 – Statement
of Additional Information
The Staff notes
the inclusion of the term “sales load” in the first sentence of the section entitled “Creation and Redemption
of Creation Unit Aggregations,” reproduced below. The Staff notes that this term does not appear elsewhere in the prospectus
or statement of additional information. Accordingly, please consider removing such reference or providing additional clarification.
The Trust issues and sells shares
of the Fund only in Creation Unit Aggregations on a continuous basis through the Distributor, without a sales load, at their
net asset values next determined after receipt, on any Business Day (as defined below), of an order in proper form.
Response to Comment 20
The Fund respectfully
declines to make the requested revision, as the referenced disclosure is set forth as the first sentence Item L in the Fund’s
exemptive relief order.
Comment 21 – Statement
of Additional Information
Please provide
in correspondence a copy of the index methodology with the response letter.
Response to Comment 21
The Fund is
unable to provide a copy of the index methodology because the Fund is actively managed and does not seek to track the performance
of an index.
*
* * * * * * *
Please call
me at (312) 845-3484 if you have any questions or issues you would like to discuss regarding these matters.
Sincerely yours,
Chapman and Cutler llp
By:
/s/ Morrison C. Warren
Morrison C. Warren
Exhibit A
Fees and Expenses of the Fund
The following table describes
the fees and expenses you may pay if you buy and hold shares of the Fund. Investors purchasing and selling shares may be subject to costs (including customary brokerage commissions) charged by their broker, which are
not reflected in the table below.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)
None
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Management Fees
0.75%
Distribution and Service (12b-1) Fees
0.00%
Other Expenses(1)
0.00%
Total Annual Fund Operating Expenses
0.75%
Fee Waiver(2)
0.10%
Total Annual Fund Operating Expenses After Fee Waiver
0.65%
(1)
“Other Expenses” is an estimate based on the expenses the Fund expects to incur for the current fiscal year.
(2)
Pursuant to a contractual agreement, First Trust Advisors L.P., the Fund's investment advisor,
has agreed to waive management fees of 0.10% of average daily net assets until April 6, 2022. The waiver agreement may be
terminated by action of the Trust's Board of Trustees at any time upon 60 days' written notice by the Trust, on behalf of the
Fund, or by the Fund's investment advisor only after April 6, 2022.
Example
The example below is intended to
help you compare the cost of i