FTHY: A Fixed-Income Fund Offering Term Opportunities

First Trust High Yield Opportunities 2027 Term (FTHY) is a fixed-income fund that invests in senior loans and high yield bonds. The fund has a term of 2027, offering investors a fixed income opportunity. The previous update noted FTHY's potential for term opportunities, with a focus on its investment strategy and performance.

First Trust High Yield Opportunities 2027 Term Fund (FTHY) is a fixed-income fund with a term ending in 2027, designed to offer investors a stable income stream. The fund's investment strategy focuses on high yield debt securities, including senior loans and high yield bonds. This article provides an overview of FTHY's investment strategy, potential benefits, and risks.

Investment Strategy and Objectives

FTHY aims to provide current income by investing at least 80% of its assets in high yield debt securities. These securities are typically rated below investment grade or are unrated but considered of comparable quality. The fund's investment objective is to generate income through these high yield securities, which are often referred to as "junk" or "high yield" bonds due to their speculative nature [1].

Monthly Distributions

One of the key features of FTHY is its monthly distribution. On August 20, 2025, the fund declared a monthly distribution of $0.125 per share, payable on September 25, 2025, to shareholders of record as of September 2, 2025 [1]. This distribution consists of net investment income earned by the fund and may also include net short-term realized capital gains.

Risks

Investing in FTHY carries several risks, including market risk, issuer risk, reinvestment risk, prepayment risk, credit risk, and interest rate risk. Market risk is the possibility that the value of the fund's investments may decline due to adverse economic conditions, political events, or regulatory factors. Issuer risk refers to the potential decline in the value of fixed-income securities due to issues related to the issuer. Reinvestment risk is the risk that the fund may not be able to reinvest proceeds from matured, traded, or called bonds at market interest rates that match the fund's current earnings rate. Prepayment risk is the risk that the actual outstanding debt on which the fund derives interest income may be reduced upon a prepayment. Credit risk is the risk that an issuer of a security may default on its payments, and interest rate risk is the risk that fixed-income securities may decline in value due to changes in market interest rates [1].

Senior Loans

FTHY also invests in senior loans, which are structured as floating rate instruments. The interest rate payable on these loans fluctuates with interest rate changes, which can impact the fund's income and market value. Additionally, the senior loan market has seen an increase in loans with weaker lender protections, such as limited financial maintenance covenants or no financial maintenance covenants at all. These weaker protections can hinder the fund's ability to reprice credit risk and restructure problematic loans, potentially increasing the fund's exposure to losses [1].

Conclusion

First Trust High Yield Opportunities 2027 Term Fund offers investors a fixed-income opportunity with a term ending in 2027. The fund's investment strategy focuses on high yield debt securities, with a monthly distribution of $0.125 per share. However, investing in FTHY carries several risks, including market risk, issuer risk, reinvestment risk, prepayment risk, credit risk, and interest rate risk. Investors should carefully consider these risks and ensure that the fund aligns with their investment objectives and risk tolerance.

References

[1] https://finance.yahoo.com/news/first-trust-high-yield-opportunities-201000813.html