Understanding the FIRST TRUST AAA CMBS ETF (CAAA)

What this ETF is trying to do

The FIRST TRUST AAA CMBS ETF (ticker: CAAA) is an exchange-traded fund listed on the NYSE. While the specific investment goal isn't detailed in the data, it holds assets like the Morgan Stanley Instl Lqudty Trs Instl (MISXX), which makes up 4.13% of its portfolio.

What the numbers show

When looking at an ETF, it is important to know the difference between "price return" and "total return."

• Price Return: This only tracks how the share price changes. For CAAA, the year-to-date (YTD) price return is approximately -3.41%. The one-year price return is approximately -3.84%.

• Total Return: This includes both the price changes and the money paid out to investors (distributions). For CAAA, the YTD total return is approximately -0.24%. However, the one-year total return is positive at approximately 0.87%.

To visualize this, the current price is $19.80. An estimated price from roughly one year ago was approximately $20.59.

Income and distribution explanation

This ETF provides cash payments to investors, known as distributions. The distribution yield is approximately 4.91%. These payments usually happen monthly, and over the last 12 months, there were 12 payouts. The most recent trailing distributions totaled $0.973 per share.

It is important to remember that a high distribution yield does not mean the investor earned that same amount as total return. Total return is the most accurate way to see how much value was actually gained or lost.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price can sometimes look like erosion, they are not always the same thing.

For CAAA, the erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• The ETF provides regular monthly distributions.

• While the share price has seen some declines, the one-year total return is positive (0.87%).

• The erosion-risk measurements suggest the fund is currently stable or moving sideways.

Cons

• The share price has experienced a decline both year-to-date and over the last year.

• The YTD total return is currently negative (-0.24%).

Beginner takeaway

When looking at CAAA, pay close attention to the difference between the share price and the total return. Even though the share price has gone down over the last year, the total return was positive because of the cash distributions paid out to investors. Always look at total return to get the full picture of an investment's performance.