First Trust Low Duration Opportunities ETF

First Trust Low Duration Opportunities ETF (LMBS) is an actively managed bond fund that holds mostly mortgage-backed securities, largely those tied to Fannie Mae, Freddie Mac and Ginnie Mae. It targets a duration of three years or less. Duration measures interest-rate sensitivity, so a short duration means its price tends to move less than longer-term bond funds when rates change. The trade-off is cost: a 0.66% expense ratio, against 0.03% for VMBS and 0.04% for MBB.

• Over the year to Oct 27, 2026, LMBS returned +2.0%, 2nd of 8 among similar funds.
• Its 5-year annualized return was +3.2% and its 10-year +2.4%.
• In the 2020 COVID crash it fell 5.3% and regained its old high 44.3 months after the low.
• Its worst full calendar year was 2022 (-3.0%); its best was 2025 (+7.4%).
• The deepest fall in its price history was 6.4% (Mar 6, 2020 to Oct 21, 2022), recovered by Dec 1, 2023.

As of Jul 31, 2026, the fund held 1,169 securities; the ten largest made up 15.44% of assets.

The bonds mature in 19.4 years on average (weighted by size), with an average coupon of 3.34%.

• Over the three months to Jul 31, 2026, investors added a net $241.4M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +0.24%, +0.08%, -0.08%.

LMBS does not track an index. First Trust's managers pick the holdings. The main goal is current income, and the second is capital growth. At least 60% of net assets, including borrowed money, must go into mortgage-related investments. These are bonds backed by pools of home or commercial property loans, plus versions of those pools that are split into slices of principal and interest. Up to 40% can sit in cash and non-mortgage US government debt. Mortgage bonds without a government-entity guarantee are capped at 20%. As of July 31, 2026, the fund held 1,169 securities. The largest were two Fannie Mae 30-year mortgage pools, at 3.1% and 2.3% of assets.

The key rule is an effective duration of three years or less. The prospectus gives an example: a three-year duration means the fund's value would fall about 3% if rates rose 1%. The advisor estimates duration with third-party models of each holding's cash flows, including how fast borrowers pay off their loans early. That matters because the holdings' average stated maturity was 19.4 years. The fund also held 76 interest-rate derivative positions, mainly Treasury futures, and may sell short up to 30% of net assets.

LMBS trades heavily, with 268% portfolio turnover. It also uses mortgage dollar rolls and to-be-announced trades, which agree to buy or sell mortgage pools for delivery at a later date. Its debt exposure totaled 109.6% of net assets.

• LMBS charges 0.66% a year, versus an average of 0.23% for the similar funds below (7th of 8, cheapest first).
• Of that, 0.64% is the management fee; the rest covers other fund expenses.

Its short duration and low price swings make it a lower-volatility bond holding that also pays a monthly income, though it costs more than similar funds.

LMBS has been a low-volatility holding that pays a monthly income. Over the three years through October 27, 2026, its annualized volatility (a measure of price swings) was 2.7%. Its trailing 12-month yield was 4.53%. It still lost money in rough patches. It fell 5.3% between March 6 and March 23, 2020. It lost 3.2% in 2022, its worst calendar year, as rates rose. Its deepest drop, 6.4%, ran from March 2020 to October 2022. It did not regain its earlier high until December 1, 2023. Anyone who had to sell during that stretch would have locked in losses, though modest ones. The fund launched in 2014, so it has no 2008 record. Its 0.66% expense ratio takes a noticeable share of a bond fund's yield. Past results don't predict future ones, and any plan should look at the whole portfolio, not one fund.

Matched by bond funds with the closest average maturity and issuer mix (N-PORT).