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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| First Trust Specialty Finance and Financial Opportunities Fund | NYSE:FGB | NYSE | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.04 | 0.94% | 4.31 | 4.33 | 4.28 | 4.29 | 19,684 | 22:43:43 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22039
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address
of agent for service)
Registrant’s telephone number, including area code: 630-765-8000
Date of fiscal year end: November 30
Date of reporting period:
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) The Report to Shareholders is attached herewith.
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22 |
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28 |
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30 |
| Performance | ||||
| Average Annual Total Returns | ||||
| 1
Year Ended 11/30/23 |
5
Years Ended 11/30/23 |
10
Years Ended 11/30/23 |
Inception
(5/25/07) to 11/30/23 | |
| Fund Performance(3) | ||||
| NAV | 16.69% | 2.39% | 2.36% | 0.90% |
| Market Value | 6.04% | -1.84% | 1.22% | -0.37% |
| Index Performance | ||||
| Blended Benchmark(4) | 9.15% | 7.03% | 6.14% | N/A |
| MSCI U.S. Investable Market Financials Index(5) | -1.65% | 5.21% | 6.95% | N/A |
| (1) | Most recent distribution paid through November 30, 2023. Subject to change in the future. |
| (2) | Distribution rates are calculated by annualizing the most recent distribution paid through the report date and then dividing by Common Share Price or NAV, as applicable, as of November 30, 2023. Subject to change in the future. |
| (3) | Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
| (4) | The
Blended Benchmark consists of a 70/20/10 blend of the MVIS U.S. Business Development Companies Index, the FTSE NARIET Mortgage REIT Index
and the S&P SmallCap Financials Index. The Blended Benchmark return is calculated by using the monthly return of the three indices during each period shown above. At the beginning of each month, the three indices are rebalanced, to account for divergence from that ratio that occurred during the course of each month to the ratios noted above. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Benchmark for each period shown above. Since the MVIS U.S. Business Development Companies Index had an inception date of August 4, 2011, the performance of the Blended Benchmark is not available for all of the periods disclosed. |
| (5) | Because the index has an inception date of June 5, 2007, performance data is not available for all the periods shown. |
| Performance Analysis | ||||
| Average Annual Total Returns | ||||
| 1
Year Ended 11/30/23 |
5
Years Ended 11/30/23 |
10
Years Ended 11/30/23 |
Inception
(5/25/07) to 11/30/23 | |
| Fund Performance(1) | ||||
| NAV | 16.69% | 2.39% | 2.36% | 0.90% |
| Market Value | 6.04% | -1.84% | 1.22% | -0.37% |
| Index Performance | ||||
| Blended Benchmark(2) | 9.15% | 7.03% | 6.14% | N/A |
| MSCI U.S. Investable Market Financials Index(3) | -1.65% | 5.21% | 6.95% | N/A |
| (1) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distribution, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for period of less than one year. Past performance is not indicative of future results. |
| (2) | The Blended Benchmark consists of a 70/20/10 blend of the MVIS U.S. Business Development Companies Index, the FTSE NARIET Mortgage REIT Index and the S&P SmallCap Financials Index. The Blended Benchmark returns are calculated by using the monthly return of the three indices during each period shown above. At the beginning of each month, the three indices are rebalanced, to account for divergence from that ratio that occurred during the course of each month to the ratios noted above. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Benchmark for each period shown above. Since the MVIS U.S. Business Development Companies Index had an inception date of August 4, 2011, the performance of the Blended Benchmark is not available for all of the periods disclosed. |
| (3) | Because the index has an inception date of June 5, 2007, performance data is not available for all the periods shown in the table. |
| ASSETS: | |
|
Investments, at value |
$ 62,559,348 |
|
Cash |
3,857,773 |
|
Foreign currency |
20 |
|
Dividends receivable |
119,821 |
|
Prepaid expenses |
3,019 |
|
Total Assets |
66,539,981 |
| LIABILITIES: | |
|
Outstanding loan |
8,600,000 |
| Payables: | |
|
Distributions |
1,185,326 |
|
Audit and tax fees |
59,141 |
|
Investment advisory fees |
53,476 |
|
Interest and fees on loan |
52,380 |
|
Shareholder reporting fees |
16,219 |
|
Legal fees |
5,846 |
|
Trustees’ fees and expenses |
3,622 |
|
Transfer agent fees |
3,090 |
|
Administrative fees |
2,637 |
|
Custodian fees |
2,308 |
|
Financial reporting fees |
771 |
|
Other liabilities |
2,126 |
|
Total Liabilities |
9,986,942 |
|
NET ASSETS |
$56,553,039 |
| NET ASSETS consist of: | |
|
Paid-in capital |
$ 112,902,839 |
|
Par value |
143,676 |
|
Accumulated distributable earnings (loss) |
(56,493,476) |
|
NET ASSETS |
$56,553,039 |
|
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) |
$3.94 |
|
Number of |
|
|
Investments, at cost |
$66,583,904 |
|
Foreign currency, at cost (proceeds) |
$26 |
| INVESTMENT INCOME: | ||
|
Dividends |
$ 6,474,311 | |
|
Interest |
43,927 | |
|
Total investment income |
6,518,238 | |
| EXPENSES: | ||
|
Investment advisory fees |
624,092 | |
|
Interest and fees on loan |
606,183 | |
|
Audit and tax fees |
58,558 | |
|
Shareholder reporting fees |
51,395 | |
|
Listing expense |
23,750 | |
|
Administrative fees |
21,562 | |
|
Trustees’ fees and expenses |
19,868 | |
|
Transfer agent fees |
18,480 | |
|
Legal fees |
14,601 | |
|
Financial reporting fees |
9,250 | |
|
Custodian fees |
3,733 | |
|
Other |
8,109 | |
|
Total expenses |
1,459,581 | |
|
NET INVESTMENT INCOME (LOSS) |
5,058,657 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
|
Net realized gain (loss) on investments |
(1,472,282) | |
|
Net change in unrealized appreciation (depreciation) on investments |
4,104,165 | |
|
NET REALIZED AND UNREALIZED GAIN (LOSS) |
2,631,883 | |
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ 7,690,540 | |
| Year Ended 11/30/2023 |
Year Ended 11/30/2022 | ||
| OPERATIONS: | |||
|
Net investment income (loss) |
$ 5,058,657 | $ 3,758,321 | |
|
Net realized gain (loss) |
(1,472,282) | (2,032,454) | |
|
Net change in unrealized appreciation (depreciation) |
4,104,165 | (5,577,903) | |
|
Net increase (decrease) in net assets resulting from operations |
7,690,540 | (3,852,036) | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
|
Investment operations |
(4,741,305) | (4,009,322) | |
|
Return of capital |
— | (731,983) | |
|
Total distributions to shareholders |
(4,741,305) | (4,741,305) | |
|
Total increase (decrease) in net assets |
2,949,235 | (8,593,341) | |
| NET ASSETS: | |||
|
Beginning of period |
53,603,804 | 62,197,145 | |
|
End of period |
$ 56,553,039 | $ 53,603,804 | |
| COMMON SHARES: | |||
|
Common Shares at end of period |
14,367,591 | 14,367,591 |
| Cash flows from operating activities: | ||
|
Net increase (decrease) in net assets resulting from operations |
$7,690,540 | |
| Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities: | ||
|
Purchases of investments |
(10,031,330) | |
|
Sales, maturities and paydown of investments |
12,060,188 | |
|
Return of capital and realized gain distributions received from investments |
249,532 | |
|
Net realized gain/loss on investments |
1,472,282 | |
|
Net change in unrealized appreciation/depreciation on investments |
(4,104,165) | |
| Changes in assets and liabilities: | ||
|
Increase in dividends receivable |
(13,751) | |
|
Increase in prepaid expenses |
(55) | |
|
Increase in interest and fees payable on loan |
16,497 | |
|
Increase in investment advisory fees payable |
2,474 | |
|
Decrease in audit and tax fees payable |
(112) | |
|
Increase in legal fees payable |
5,162 | |
|
Increase in shareholder reporting fees payable |
3,808 | |
|
Increase in administrative fees payable |
201 | |
|
Increase in custodian fees payable |
1,489 | |
|
Increase in transfer agent fees payable |
1,559 | |
|
Increase in trustees’ fees and expenses payable |
563 | |
|
Increase in other liabilities payable |
1,999 | |
|
Cash provided by operating activities |
$7,356,881 | |
| Cash flows from financing activities: | ||
|
Distributions to Common Shareholders from investment operations |
(4,741,305) | |
|
Cash used in financing activities |
(4,741,305) | |
|
Increase in cash and foreign currency |
2,615,576 | |
|
Cash and foreign currency at beginning of period |
1,242,217 | |
|
Cash and foreign currency at end of period |
$3,857,793 | |
| Supplemental disclosure of cash flow information: | ||
|
Cash paid during the period for interest and fees |
$589,686 |
| Year Ended November 30, | |||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | |||||
|
Net asset value, beginning of period |
$ 3.73 | $ 4.33 | $ 3.44 | $ 5.92 | $ 5.78 | ||||
| Income from investment operations: | |||||||||
|
Net investment income (loss) |
0.35 (a) | 0.26 | 0.26 | 0.33 | 0.58 | ||||
|
Net realized and unrealized gain (loss) |
0.19 | (0.53) | 0.96 | (2.37) | 0.22 | ||||
|
Total from investment operations |
0.54 | (0.27) | 1.22 | (2.04) | 0.80 | ||||
| Distributions paid to shareholders from: | |||||||||
|
Net investment income |
(0.33) | (0.28) | (0.30) | (0.44) | (0.40) | ||||
|
Return of capital |
— | (0.05) | (0.03) | — | (0.26) | ||||
|
Total distributions paid to Common Shareholders |
(0.33) | (0.33) | (0.33) | (0.44) | (0.66) | ||||
|
Net asset value, end of period |
$ | $3.73 | $4.33 | $3.44 | $5.92 | ||||
|
Market value, end of period |
$ | $3.49 | $4.00 | $3.28 | $5.90 | ||||
|
Total return based on net asset value (b) |
16.69% | (5.60)% | 36.49% | (34.67)% | 14.58% | ||||
|
Total return based on market value (b) |
6.04% | (4.39)% | 32.23% | (37.49)% | 8.74% | ||||
| Ratios to average net assets/supplemental data: | |||||||||
|
Net assets, end of period (in 000’s) |
$ 56,553 | $ 53,604 | $ 62,197 | $ 49,437 | $ 85,054 | ||||
|
Ratio of total expenses to average net assets |
2.71% | 2.02% | 1.78% | 2.35% | 2.56% | ||||
|
Ratio of total expenses to average net assets excluding interest expense |
1.59% | 1.53% | 1.49% | 1.78% | 1.60% | ||||
|
Ratio of net investment income (loss) to average net assets |
9.40% | 6.44% | 6.35% | 8.87% | 9.95% | ||||
|
Portfolio turnover rate |
16% | 5% | 8% | 20% | 7% | ||||
| Indebtedness: | |||||||||
|
Total loan outstanding (in 000’s) |
$ 8,600 | $ 8,600 | $ 8,600 | $ 6,500 | $ 25,000 | ||||
|
Asset coverage per $1,000 of indebtedness (c) |
$ 7,576 | $ 7,233 | $ 8,232 | $ 8,606 | $ 4,402 | ||||
| (a) | Based on average shares outstanding. |
| (b) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and changes in net asset value per share for net asset value returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
| (c) | Calculated by subtracting the Fund’s total liabilities (not including the loan outstanding) from the Fund’s total assets, and dividing by the outstanding loan balance in 000’s. |
| 1) | the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; |
| 2) | the type of security; |
| 3) | the size of the holding; |
| 4) | the initial cost of the security; |
| 5) | transactions in comparable securities; |
| 6) | price quotes from dealers and/or third-party pricing services; |
| 7) | relationships among various securities; |
| 8) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
| 9) | an analysis of the issuer’s financial statements; |
| 10) | the existence of merger proposals or tender offers that might affect the value of the security; and |
| 11) | other relevant factors. |
| 1) | the last sale price on the exchange on which they are principally traded; |
| 2) | the value of similar foreign securities traded on other foreign markets; |
| 3) | ADR trading of similar securities; |
| 4) | closed-end fund or exchange-traded fund trading of similar securities; |
| 5) | foreign currency exchange activity; |
| 6) | the trading prices of financial products that are tied to baskets of foreign securities; |
| 7) | factors relating to the event that precipitated the pricing problem; |
| 8) | whether the event is likely to recur; |
| 9) | whether the effects of the event are isolated or whether they affect entire markets, countries or regions; and |
| 10) | other relevant factors. |
| • | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| • | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
| o | Quoted prices for similar investments in active markets. |
| o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
| o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
| o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| • | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
| Distributions paid from: | 2023 | 2022 |
|
Ordinary income |
$4,741,305 | $4,009,322 |
|
Capital gains |
— | — |
|
Return of capital |
— | 731,983 |
|
Undistributed ordinary income |
$— |
|
Undistributed capital gains |
— |
|
Total undistributed earnings |
— |
|
Accumulated capital and other losses |
(50,972,396) |
|
Net unrealized appreciation (depreciation) |
(4,335,754) |
|
Total accumulated earnings (losses) |
(55,308,150) |
|
Other |
(1,185,326) |
|
Paid-in capital |
113,046,515 |
|
Total net assets |
$56,553,039 |
| Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized (Depreciation) |
Net
Unrealized Appreciation (Depreciation) | |||
| $66,895,095 | $6,374,151 | $(10,709,898) | $(4,335,747) |
| (1) | If Common Shares are trading at or above net asset value (“NAV”) at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) NAV per Common Share on that date or (ii) 95% of the market price on that date. |
| (2) | If Common Shares are trading below NAV at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market within 30 days of the valuation date except where temporary curtailment or suspension of purchases is necessary to comply with federal securities laws. Interest will not be paid on any uninvested cash payments. |
| • | The Fund will concentrate its investments in securities of companies within industries in the financial sector, which is comprised of specialty finance companies, banks, savings institutions, brokerage firms, investment management companies, insurance companies, holding companies of the foregoing and companies that provide related services to such companies. |
| • | The Fund will not invest more than 20% of its Managed Assets in master limited partnerships. |
| NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
|
Assumed Portfolio Total Return (Net of Expenses) |
-10% | -5% | 0% | 5% | 10% |
|
Common Share Total Return |
- |
- |
- |
| Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal
Occupations During Past 5 Years |
Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
| INDEPENDENT TRUSTEES | ||||
| Richard
E. Erickson, Trustee (1951) |
• Three Year Term• Since Fund Inception | Retired; Physician, Edward-Elmhurst Medical Group (2021 to September 2023); Physician and Officer, Wheaton Orthopedics (1990 to 2021) | 256 | None |
| Thomas
R. Kadlec, Trustee (1957) |
• Three Year Term• Since Fund Inception | Retired; President, ADM Investor Services, Inc. (Futures Commission Merchant) (2010 to July 2022) | 256 | Director, National Futures Association and ADMIS Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association |
| Denise
M. Keefe, Trustee (1964) |
• Three Year Term• Since 2021 | Executive Vice President, Advocate Aurora Health and President, Advocate Aurora Continuing Health Division (Integrated Healthcare System) | 256 | Director and Board Chair of Advocate Home Health Services, Advocate Home Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director of RML Long Term Acute Care Hospitals; Director of Senior Helpers (since 2021); and Director of MobileHelp (since 2022) |
| Robert
F. Keith, Trustee (1956) |
• Three Year Term• Since Fund Inception | President, Hibs Enterprises (Financial and Management Consulting) | 256 | Formerly, Director of Trust Company of Illinois |
| Niel
B. Nielson, Trustee (1954) |
• Three Year Term• Since Fund Inception | Senior Advisor (2018 to Present), Managing Director and Chief Operating Officer (2015 to 2018), Pelita Harapan Educational Foundation (Educational Products and Services) | 256 | None |
| (1) | Currently, Denise M. Keefe and Robert F. Keith, as Class I Trustees, are serving as trustees until the Fund’s 2026 annual meeting of shareholders. Richard E. Erickson, Thomas R. Kadlec and Bronwyn Wright, as Class II Trustees, are serving as trustees until the Fund’s 2024 annual meeting of shareholders. James A. Bowen and Niel B. Nielson, as Class III Trustees, are serving as trustees until the Fund’s 2025 annual meeting of shareholders. |
| Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal
Occupations During Past 5 Years |
Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
| INDEPENDENT TRUSTEES | ||||
| Bronwyn
Wright, Trustee (1971) |
• Three Year Term• Since 2023 | Independent Director to a number of Irish collective investment funds (2009 to Present); Various roles at international affiliates of Citibank (1994 to 2009), including Managing Director, Citibank Europe plc and Head of Securities and Fund Services, Citi Ireland (2007 to 2009) | 232 | None |
| INTERESTED TRUSTEE | ||||
| James
A. Bowen(2), Trustee and Chairman of the Board (1955) |
• Three Year Term• Since Fund Inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 256 | None |
| Name and Year of Birth | Position and Offices with Fund | Term of Office and Length of Service | Principal
Occupations During Past 5 Years |
| OFFICERS(3) | |||
| James
M. Dykas (1966) |
President and Chief Executive Officer | • Indefinite
Term • Since 2016 |
Managing Director and Chief Financial Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) |
| Derek
D. Maltbie (1972) |
Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite
Term • Since 2023 |
Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., July 2021 to Present. Previously, Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., 2014 to 2021. |
| W.
Scott Jardine (1960) |
Secretary and Chief Legal Officer | • Indefinite
Term • Since Fund Inception |
General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
| Daniel
J. Lindquist (1970) |
Vice President | • Indefinite
Term • Since Fund Inception |
Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
| Kristi
A. Maher (1966) |
Chief Compliance Officer and Assistant Secretary | •
Indefinite Term • Chief Compliance Officer Since January 2011• Assistant Secretary Since Fund Inception |
Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
| (2) | Mr. Bowen is deemed an “interested person” of the Fund due to his position as CEO of First Trust Advisors L.P., investment advisor of the Fund. |
| (3) | The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. |
| • | Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; |
| • | Information about your transactions with us, our affiliates or others; |
| • | Information we receive from your inquiries by mail, e-mail or telephone; and |
| • | Information we collect on our website through the use of “cookies.” For example, we may identify the pages on our website that your browser requests or visits. |
| • | In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. |
| • | We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). |
(b) Not applicable.
Item 2. Code of Ethics.
| (a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
| (d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
| (e) | Not applicable. |
| (f) | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of trustees has determined that Thomas R. Kadlec, Robert F. Keith and Bronwyn Wright are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees (Registrant) -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $44,000 for the fiscal year ended November 30, 2022 and $44,000 for the fiscal year ended November 30, 2023.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2022 and $0 for the fiscal year ended November 30, 2023.
Audit-Related Fees (Investment Advisor) -- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2022 and $0 for the fiscal year ended November 30, 2023.
(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant were $16,250 for the fiscal year ended November 30, 2022 and $21,000 for the fiscal year ended November 30, 2023. These fees were for tax consultation and/or tax return preparation.
Tax Fees (Investment Advisor) -- The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant’s advisor were $0 for the fiscal year ended November 30, 2022 and $0 for the fiscal year ended November 30, 2023.
(d) All Other Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended November 30, 2022 and $0 for the fiscal year ended November 30, 2023.
All Other Fees (Investment Advisor) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant’s investment advisor, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended November 30, 2022 and $0 for the fiscal year ended November 30, 2023.
(e)(1) Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s advisor (not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
(e)(2) The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant’s investment advisor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant for the fiscal year ended November 30, 2022, were $16,250 for the registrant and $0 for the registrant’s investment advisor; and for the fiscal year ended November 30, 2023, were $21,000 for the registrant and $44,000 for the registrant’s investment advisor.
(h) The registrant’s audit committee of its Board of Trustees has considered whether the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
(i) Not applicable.
(j) Not applicable.
Item 5. Audit Committee of Listed Registrants.
(a) The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 consisting of all the independent directors of the registrant. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Denise M. Keefe, Robert F. Keith, Niel B. Nielson and Bronwyn Wright.
Item 6. Investments.
(a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
A description of the policies and procedures used to vote proxies on behalf of the Fund is attached as an exhibit.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio Manager(s) or Management Team Members
Investment decisions for the registrant are made by the Portfolio Management Team of Confluence Investment Management LLC (“Confluence”). The members of the Confluence Portfolio Management Team are responsible for portfolio management including security research and selection, leverage management, guidance compliance and position review, communication with and reporting to Advisor to the Fund.
Information provided as of December 6, 2023
Mark A. Keller, CFA – Chief Executive Officer and Chief Investment Officer
Mr. Keller has over 30 years of investment experience with a focus on value-oriented equity analysis and management. From 1994 to May 2008, he was the Chief Investment Officer of Gallatin Asset Management, Inc., and its predecessor organization, A.G. Edwards Asset Management, the investment management arm of A.G. Edwards, Inc. From 1999 to 2008, Mr. Keller was Chairman of A.G. Edwards’ Investment Strategy Committee, which set investment policy and established asset allocation models for the entire organization. Mr. Keller was a founding member of the A.G. Edwards Investment Strategy Committee, on which he served for over 20 years, the last ten of which as Chairman of the Committee. Mr. Keller began his career with A.G. Edwards in 1978, serving as an equity analyst for the firm’s Securities Research Department from 1979 to 1994. During his last five years in Securities Research, Mr. Keller was Equity Strategist and manager of the firm’s Focus List. Mr. Keller was a Senior Vice President of A.G. Edwards & Sons, Inc. and of Gallatin Asset Management, Inc., and was a member of the Board of Directors of both companies. Mr. Keller received a Bachelor of Arts from Wheaton College (Illinois) and is a CFA charterholder.
David B. Miyazaki, CFA – Senior Vice President and Portfolio Manager
Prior to joining Confluence in May 2008, Mr. Miyazaki served as a Portfolio Manager and Analyst with Gallatin Asset Management, Inc., the investment management arm of A.G. Edwards, Inc. Mr. Miyazaki was responsible for equity investments in value-oriented separately managed accounts. He also co-managed the A.G. Edwards’ ETF-based asset allocation program. In addition to portfolio management, Mr. Miyazaki served as a member of the A.G. Edwards’ Investment Strategy Committee. As a strategist, he was responsible for the firm’s quantitative asset allocation models, including its Cyclical Asset Allocation program. Prior to joining A.G. Edwards in 1999, Mr. Miyazaki was a Portfolio Manager at Koch Industries in Wichita, Kansas. His previous experience includes working as an Investment Analyst at Prudential Capital Group in Dallas, Texas, and as a Bond Trader at Barre & Company, also in Dallas. Mr. Miyazaki received a Bachelor of Business Administration from Texas Christian University and is a CFA charterholder.
Daniel T. Winter, CFA – Senior Vice President and Chief Investment Officer – Value Equity
Prior to joining Confluence in May 2008, Mr. Winter served as a Portfolio Manager and Analyst with Gallatin Asset Management, Inc., the investment arm of A.G. Edwards, Inc. While at Gallatin, Mr. Winter chaired the portfolio management team responsible for the firm’s six value-oriented equity strategies. His responsibilities also included directing the strategy implementation and trading execution for the equity portfolios. Mr. Winter also served as a portfolio manager for the Cyclical Growth ETF Portfolio and the Cyclical Growth and Income ETF Portfolio which were offered through variable annuities. He was also a member of the firm’s Allocation Advisor Committee which oversaw the A.G. Edwards exchange-traded fund focused strategies. Prior to joining the firm’s Asset Management division in 1996, Mr. Winter served as a portfolio manager for A.G. Edwards Trust Company. Mr. Winter earned a Bachelor of Arts in business management from Eckerd College and a Master of Business Administration from Saint Louis University. Mr. Winter is a CFA charterholder.
| Name | Title | Length of Service | Business Experience Past 5 Years |
| Mark Keller | CEO and CIO | 16 | Chief Executive Officer and Chief Investment Officer of Confluence Investment Management LLC |
| Daniel Winter | Senior V.P. and CIO of Value Equity | 16 | Portfolio Manager and Analyst with Confluence Investment Management LLC |
| David Miyazaki | Senior V.P. and Portfolio Manager | 16 | Portfolio Manager and Analyst with Confluence Investment Management LLC |
| (a)(2) | Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest |
Information provided as of December 6, 2023
Other Accounts Managed by Portfolio Manager(s) or Management Team Member
|
Name of Portfolio Manager or
|
Type of Accounts
|
Total No. of Accounts
|
Total Assets
|
No. of
|
Total Assets in Accounts where Advisory Fee is Based
on
|
| 1. Mark Keller | Registered
Investment Companies: |
1 | 21,502,709 | 0 | $0 |
| Other Accounts: | 17,253 | 6,825,256,518 | 0 | $0 | |
| Other
Pooled Investment Vehicles: |
0 | $0 | 0 | $0 | |
|
2. Daniel Winter
|
Registered
Investment Companies: |
1 | 21,502,709 | 0 | $0 |
| Other Accounts: | 15,783 | 6,325,659,332 | 0 | $0 | |
| Other
Pooled Investment Vehicles: |
0 | $0 | 0 | $0 | |
| 3. David Miyazaki | Registered Investment Companies: | 0 | $0 | 0 | $0 |
| Other Accounts: | 1,267 | 348,153,362 | 0 | $0 | |
| Other
Pooled Investment Vehicles: |
0 | $0 | 0 | $0 |
Potential Conflicts of Interests
As disclosed in the Confluence Form ADV Part 2A, from time to time, Confluence is presented, in connection with its discretionary portfolio management and investment advisory services, with an opportunity to participate in public offerings of securities. Certain of our clients, including those in certain Wrap Account Programs, may be prohibited from participating in such offerings by their respective Financial Institution. Certain of our other clients may be unable to participate in such offerings if their respective Financial Institution did not participate in the initial distribution of securities in such offering, depending on their particular Financial Institution or Custodian. Accordingly, Confluence’s policy is to not purchase shares in such public offerings for its clients. In contrast, the First Trust Specialty Finance and Financial Opportunities Fund and the First Trust Confluence Small Cap Value Fund, the open-end mutual fund and the closed-end fund for which we act as sub-advisor, and our institutional clients are not similarly restricted, and are therefore allowed to participate in public offerings.
(a)(3) Compensation Structure of Portfolio Manager(s) or Management Team Members
Information provided as of December 6, 2023
The fund’s portfolio managers are compensated with an annual base salary and a discretionary bonus based on Confluence’s overall firm profits. The firm provides a 401k contribution and may make a discretionary additional contribution. In addition, the Firm’s portfolio managers are equity owners in the Firm, aligning their long-term interests with the Fund holder to strive to achieve superior investment performance over an appropriate time period. This ensures that the portfolio managers are incented to implement a consistent investment strategy for the Fund without incurring undue risk.
Confluence allows partners to defer profit sharing allocations from the firm. Profit sharing is based on the overall firm profits rather than individual investment product strategies.
(a)(4) Disclosure of Securities Ownership
Information provided as of December 6, 2023
| Name |
Dollar Range of Registrant Shares Beneficially Owned |
| Mark Keller | $10,001 - $50,000 |
| Daniel Winter | None |
| David Miyazaki | $10,001 - $50,000 |
| Brian Hansen | $10,001 - $50,000 |
| Joe Hanzlik | $1 - $10,000 |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
| (a) | Not applicable. |
| (b) | Not applicable. |
Item 13. Exhibits.
| (a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (a)(3) | Not applicable. |
| (a)(4) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (c) | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies required by Item 7 is attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (registrant) | First Trust Specialty Finance and Financial Opportunities Fund |
| By (Signature and Title)* | /s/ James M. Dykas | |
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
| Date: | February 8, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | /s/ James M. Dykas | |
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
| Date: | February 8, 2024 |
| By (Signature and Title)* | /s/ Derek D. Maltbie | |
| Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
| Date: | February 8, 2024 |
* Print the name and title of each signing officer under his or her signature.
SENIOR FINANCIAL OFFICER
CODE OF CONDUCT
I. Introduction
This code of conduct is being adopted by the investment companies advised by First Trust Advisors L.P., from time to time, (the "FUNDS"). The reputation and integrity of the Funds are valuable assets that are vital to the Funds' success. Each officer of the Funds, and officers and employees of the investment adviser to the Funds who work on Fund matters, including each of the Funds' senior financial officers ("SFOS"), is responsible for conducting each Fund's business in a manner that demonstrates a commitment to the highest standards of integrity. SFOs include the Principal Executive Officer (who is the President), the Controller (who is the principal accounting officer), and the Treasurer (who is the principal financial officer), and any person who performs a similar function.
The Funds, First Trust Advisors L.P. and First Trust Portfolios have adopted Codes of Ethics under Rule 17j-1 under the Investment Company Act of 1940 (the "RULE 17J-1 CODE"). These Codes of Ethics are designed to prevent certain conflicts of interest that may arise when officers, employees, or directors of the Funds and the foregoing entities know about present or future Fund transactions and/or have the power to influence those transactions, and engage in transactions with respect to those same securities in their personal account(s) or otherwise take advantage of their position and knowledge with respect to those securities. In an effort to prevent these conflicts and in accordance with Rule 17j-1, the Funds adopted their Rule 17j-1 Code to prohibit transactions and conduct that create conflicts of interest, and to establish compliance procedures.
The Sarbanes-Oxley Act of 2002 was designed to address corporate malfeasance and to help assure investors that the companies in which they invest are accurately and completely disclosing financial information. Under Section 406 of the Act, all public companies (including the Funds) must either have a code of ethics for their SFOs, or disclose why they do not. The Act was intended to prevent future situations (such as occurred in well-reported situations involving such companies as Enron and WorldCom) where a company creates an environment in which employees are afraid to express their opinions or to question unethical and potentially illegal business practices.
The Funds have chosen to adopt a senior financial officer Code of Conduct to encourage their SFOs, and other Fund officers and employees of First Trust Advisors or First Trust Portfolios to act ethically and to question potentially unethical or illegal practices, and to strive to ensure that the Funds' financial disclosures are complete, accurate, and understandable.
II. Purposes of This Code of Conduct
The purposes of this Code are:
A. To promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
B. To promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Funds file with, or submits to, the SEC and in other public communications the Funds make;
C. To promote compliance with applicable governmental laws, rules and regulations;
D. To encourage the prompt internal reporting to an appropriate person of violations of the Code; and
E. To establish accountability for adherence to the Code.
III. Questions About This Code
The Funds' Boards of Trustees have designated W. Scott Jardine or other appropriate officer designated by the President of the respective Funds to be the Compliance Coordinator for the implementation and administration of the Code.
IV. Handling of Financial Information
The Funds have adopted guidelines under which its SFOs perform their duties. However, the Funds expect that all officers or employees of the adviser or distributor who participate in the preparation of any part of any Fund's financial statements follow these guidelines with respect to each Fund:
A. Act with honesty and integrity and avoid violations of this Code, including actual or apparent conflicts of interest with the Fund in personal and professional relationships.
B. Disclose to the Fund's Compliance Coordinator any material transaction or relationship that reasonably could be expected to give rise to any violations of the Code, including actual or apparent conflicts of interest with the Fund. You should disclose these transactions or relationships whether you are involved or have only observed the transaction or relationship. If it is not possible to disclose the matter to the Compliance Coordinator, it should be disclosed to the Fund's Principal Financial Officer or Principal Executive Officer.
C. Provide information to the Fund's other officers and appropriate employees of service providers (adviser, administrator, outside auditor, outside counsel, custodian, etc.) that is accurate, complete, objective, relevant, timely, and understandable.
D. Endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Fund's periodic reports.
E. Comply with the federal securities laws and other applicable laws and rules, such as the Internal Revenue Code.
F. Act in good faith, responsibly, and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated.
G. Respect the confidentiality of information acquired in the course of your work except when you have Fund approval to disclose it or where disclosure is otherwise legally mandated. You may not use confidential information acquired in the course of your work for personal advantage.
H. Share and maintain skills important and relevant to the Fund's needs.
I. Proactively promote ethical behavior among peers in your work environment.
J. Responsibly use and control all assets and resources employed or entrusted to you.
K. Record or participate in the recording of entries in the Fund's books and records that are accurate to the best of your knowledge.
V. Waivers of This Code
SFOs and other parties subject to this Code may request a waiver of a provision of this Code (or certain provisions of the Fund's Rule 17j-1 Code) by submitting their request in writing to the Compliance Coordinator for appropriate review. An executive officer of the Fund or the Audit Committee will decide whether to grant a waiver. All waivers of this Code must be disclosed to the Fund's shareholders to the extent required by SEC rules. A good faith interpretation of the provisions of this Code, however, shall not constitute a waiver.
VI. Annual Certification
Each SFO will be asked to certify on an annual basis that he/she is in full compliance with the Code and any related policy statements.
VII. Reporting Suspected Violations
A. SFOs or other officers of the Funds or employees of the First Trust group who work on Fund matters who observe, learn of, or, in good faith, suspect a violation of the Code MUST immediately report the violation to the Compliance Coordinator, another member of the Funds' or First Trust's senior management, or to the Audit Committee of the Fund Board. An example of a possible Code violation is the preparation and filing of financial disclosure that omits material facts, or that is accurate but is written in a way that obscures its meaning.
B. Because service providers such as an administrator, outside accounting firm, and custodian provide much of the work relating to the Funds' financial statements, you should be alert for actions by service providers that may be illegal, or that could be viewed as dishonest or unethical conduct. You should report these actions to the Compliance Coordinator even if you know, or think, that the service provider has its own code of ethics for its SFOs or employees.
C. SFOs or other officers or employees who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated confidentially to the extent possible.
VIII. Violations of The Code
A. Dishonest, unethical or illegal conduct will constitute a violation of this Code, regardless of whether this Code specifically refers to that particular conduct. A violation of this Code may result in disciplinary action, up to and including termination of employment. A variety of laws apply to the Funds and their operations, including the Securities Act of 1933, the Investment Company Act of 1940, state laws relating to duties owed by Fund directors and officers, and criminal laws. The federal securities laws generally prohibit the Funds from making material misstatements in its prospectus and other documents filed with the SEC, or from omitting to state a material fact. These material misstatements and omissions include financial statements that are misleading or omit materials facts.
B. Examples of criminal violations of the law include stealing, embezzling, misapplying corporate or bank funds, making a payment for an expressed purpose on a Fund's behalf to an individual who intends to use it for a different purpose; or making payments, whether corporate or personal, of cash or other items of value that are intended to influence the judgment or actions of political candidates, government officials or businesses in connection with any of the Funds' activities. The Funds must and will report all suspected criminal violations to the appropriate authorities for possible prosecution, and will investigate, address and report, as appropriate, non-criminal violations.
Amended: June 1, 2009
Certification Pursuant to Rule 30a-2(a) under the
1940 Act and Section 302
of the Sarbanes-Oxley Act
I, James M. Dykas, certify that:
| 1. | I have reviewed this report on Form N-CSR of First Trust Specialty Finance and Financial Opportunities Fund; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: | February 8, 2024 | /s/ James M. Dykas | |||
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Certification Pursuant to Rule 30a-2(a) under
the 1940 Act and Section 302
of the Sarbanes-Oxley Act
I, Derek D. Maltbie, certify that:
| 1. | I have reviewed this report on Form N-CSR of First Trust Specialty Finance and Financial Opportunities Fund; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: | February 8, 2024 | /s/ Derek D. Maltbie | |||
| Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Certification Pursuant to Rule 30a-2(b) under the
1940 Act and Section 906
of the Sarbanes-Oxley Act
I, James M. Dykas, President and Chief Executive Officer of First Trust Specialty Finance and Financial Opportunities Fund (the “registrant”), certify that:
| 1. | The Form N-CSR of the registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant. |
| Date: | February 8, 2024 | /s/ James M. Dykas | |||
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
I, Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer of First Trust Specialty Finance and Financial Opportunities Fund (the “registrant”), certify that:
| 1. | The Form N-CSR of the registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant. |
| Date: | February 8, 2024 | /s/ Derek D. Maltbie | |||
| Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
CONFLUENCE INVESTMENT MANAGEMENT LLC
PROXY VOTING POLICY
| 1. | Introduction |
As a registered investment adviser, Confluence Investment Management LLC (“Confluence”) has a fiduciary duty to act solely in the best interests of its clients. If the client is a registered investment company under the Investment Company Act of 1940 or the client requests Confluence to do so in writing, Confluence will vote proxy materials for its clients.
In cases where the discretionary client has delegated proxy voting responsibility and authority to Confluence, Confluence has adopted and implemented the following policies and procedures, which it believes are reasonably designed to ensure that proxies are voted in the best interests of its clients. In pursuing this policy, proxies should be voted in a manner that is intended to maximize value to the client. In situations where Confluence accepts such delegation and agrees to vote proxies, Confluence will do so in accordance with these Policies and Procedures. Confluence may delegate its responsibilities under these Policies and Procedures to a third party, provided that no such delegation shall relieve Confluence of its responsibilities hereunder and Confluence shall retain final authority and fiduciary responsibility for such proxy voting.
Investment advisers registered with the SEC, and which exercise voting authority with respect to client securities, are required by Rule 206(4)-6 of the Advisers Act to (a) adopt and implement written policies and procedures that are reasonably designed to ensure that client securities are voted in the best interests of clients, which must include how an adviser addresses material conflicts that may arise between an adviser’s interests and those of its clients; (b) disclose to clients how they may obtain information from the adviser with respect to the voting of proxies for their securities; (c) describe to clients a summary of its proxy voting policies and procedures and, upon request, furnish a copy to its clients; and (d) maintain certain records relating to the adviser’s proxy voting activities when the adviser does have proxy voting authority.
| 2. | Voting Guidelines |
Confluence has adopted the Broadridge Proxy Policies and Insights Shareholder Value (“Proxy Policies and Insights”) to determine how each issue on proxy ballots is to be voted. The Proxy Policies and Insights is incorporated herein by this reference, and a copy of the Proxy Policies and Insights, as may be revised from time to time, is maintained with Confluence’s proxy voting policy.
The Proxy Policies and Insights seeks to maximize shareholder value in proxy voting. While the Proxy Policies and Insights is created using voting trends of the top 10 fund families that also seek to maximize shareholder value, Confluence seeks to review the template no less frequently than annually (and make revisions when necessary) to better enhance the shareholder’s value maximization objective. Proxy statements will be voted in accordance with this template unless:
| • | Confluence determines it has a conflict, |
| • | Confluence investment team determines there is a valid reason not to follow the Proxy Policies and Insights recommendation, or |
| • | No recommendation is provided by Proxy Policies and Insights, in which case Confluence will independently determine how a particular issue is to be voted and will document that determination for the record. |
1
In the event proxy ballots are received with respect to debt securities, Confluence will vote on a case-by-case basis in a manner it believes to be in the best economic interest of clients.
Any decision to override the PPI on a particular ballot issue must receive approval by the relevant CIO or his/her delegate (typically a Director of Research). The reason for not following the Proxy Policies and Insights must be documented for recordkeeping purposes.
Confluence may determine not to vote a particular proxy, if the costs and burdens exceed the benefits of voting (e.g., when securities are subject to loan or to share blocking restrictions) or if a determination is made that not voting is in the best interest of the client.
| 3. | Responsibility |
Confluence utilizes Broadridge Financial Solutions, Inc. (“Broadridge”), an outsourcing provider to the global financial services industry, to coordinate, process, manage and maintain electronic records of Confluence proxy votes.
Confluence has adopted the Broadridge Proxy Policy and Insights. It is the responsibility of the Proxy Committee to at least annually, review the Proxy Policies and Insights for continued relevancy. Confluence is generally responsible for responding to any corporate actions as well as address any proxy ballot issues for which a recommendation is not provided by Proxy Policy and Insights.
Confluence compliance is responsible for maintaining this policy, reviewing it at least annually, and updating it as required.
All client accounts are to be directed to Broadridge in order for proxy ballots to be listed and voted on Broadridge’s Proxy Edge system. Occasionally, however, proxy ballots are forwarded directly to Confluence, which must then vote the proxy ballots independent of the Proxy Edge system. Confluence is not responsible for voting proxies it does not receive, but will make reasonable efforts to obtain missing proxies.
2
| 4. | Registered Investment Companies |
In cases in which the client is a registered investment company under the Investment Company Act of 1940 and the client delegates proxy voting, Confluence will vote proxies pursuant to this policy. Where Confluence acts as a sub-adviser of a closed-end fund that invests in other investment company securities, Confluence (as required) will vote such proxies in the same proportion as the vote of all other shareholders of the fund (i.e., “echo vote” or ‘mirror vote”), unless otherwise required by law. When required by law, Confluence will also echo vote proxies of securities in unaffiliated investment vehicles. For example, section 12(d)(1)(F) of the Investment Company Act of 1940 requires echo voting of registered investment companies that sub-advise or manage securities of other registered investment companies.
| 5. | Conflicts of Interest |
In the event an employee determines that Confluence has a conflict of interest due to, for example, a relationship with a company or an affiliate of a company, or for any other reason which could influence the advice given, the employee will advise the Chief Compliance Officer and the Proxy Committee, and the Proxy Committee will decide whether Confluence should either (1) disclose to the client the conflict to enable the client to evaluate the advice in light of the conflict or (2) disclose to the client the conflict and decline to provide the advice.
Confluence shall use commercially reasonable efforts to determine whether a potential conflict may exist, and a potential conflict shall be deemed to exist only if one or more members of the Confluence Investment Committee (on which the Chief Investment Officer is a member) knows or should have known of the conflict. Confluence is sensitive to conflicts of interest that may arise in the proxy decision-making process and has identified the following potential conflicts of interest:
| • | A principal of Confluence or any person involved in the proxy decision-making process currently serves on the Board of the portfolio company. |
| • | An immediate family member of a principal of Confluence or any person involved in the proxy decision-making process currently serves as a director or executive officer of the portfolio company. |
| • | Confluence or any affiliate holds a material ownership interest in the portfolio company. |
This list is not intended to be exclusive. All employees are obligated to disclose any potential conflict to Confluence’s Chief Compliance Officer.
3
If a material conflict is identified, Confluence management may (i) disclose the potential conflict to the client and obtain consent; or (ii) establish an ethical wall or other informational barriers between the person(s) that are involved in the conflict and the persons making the voting decisions.
Confluence will resolve identified conflicts of interest in the best interest of the client.
| 6. | Oversight of Third Parties |
Annually, the Proxy Policies and Insights will be reviewed by the Proxy Committee. Annually, Confluence compliance will request documents necessary to evaluate Broadridge’s continuing ability to adequately provide services to Confluence and its clients (e.g., SOC-1 report).
Confluence will perform periodic review of Broadridge through reports available on the Broadridge Proxy Edge site.
| 7. | Client Requests for Information |
All client requests for information regarding proxy votes, or policies and procedures, received by any employee should be forwarded to Confluence compliance. Confluence compliance will prepare a written response to the client with the information requested.
| 8. | Disclosure |
| • | Confluence will provide required disclosures in response to Item 17 of Form ADV Part 2A summarizing this proxy voting policy and procedures, including a statement that clients may request information regarding how Confluence voted client’s proxies; |
| • | Confluence will also disclose how clients may obtain a copy of the firm’s proxy voting policies and procedures, however Confluence will not disclose how proxies were voted to third-party non-clients, and; |
| • | Confluence shall make known its proxy voting policy in its advisory agreement or along with its advisory agreement. |
| 9. | Recordkeeping |
The Chief Compliance Officer or his/her designate is responsible for maintaining the following records, however Confluence may rely on its third-party service provider to retain certain records:
| • | proxy voting policies and procedures; |
4
• proxy statements (provided, however, that Confluence may rely on the Securities and Exchange Commission’s EDGAR system if the issuer filed its proxy statements via EDGAR or may rely on a third party as long as the third party has provided Confluence with a copy of the proxy statement promptly upon request);
| • | records of electronic votes cast and abstentions; and |
• any records prepared by Confluence that were material to a proxy voting decision or that memorialized a decision.
5
N-2 |
12 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Nov. 30, 2023
$ / shares
shares
| |||||||||||||
| Cover [Abstract] | |||||||||||||
| Entity Central Index Key | 0001392994 | ||||||||||||
| Amendment Flag | false | ||||||||||||
| Entity Inv Company Type | N-2 | ||||||||||||
| Document Type | N-CSR | ||||||||||||
| Entity Registrant Name | First Trust Specialty Finance & Financial Opportunities Fund | ||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Investment Objectives and Practices [Text Block] | Investment
Objectives
The
Fund’s primary investment objective is to seek a high level of current income. As a secondary objective, the Fund seeks an attractive
total return.
Principal
Investment Policies
Under
normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its Managed Assets in a portfolio
of securities of specialty finance and other financial companies that the Fund’s Sub-Advisor believes offer attractive opportunities
for income and capital appreciation. Specialty finance companies are companies that provide financing to borrowers with capital
needs that are different relative to traditional borrowers, who typically utilize commercial banks or public debt markets to meet their
financing needs.
In
addition, under normal market conditions:
The
Advisor and Sub-Advisor believe that specialty finance companies may be attractive for investors seeking high levels of current income
as many specialty finance companies are “pass-through” entities in which the income of the company is treated as income to
the shareholders (i.e., cash flow is not taxed at the entity level). One type of specialty finance company, BDCs, has emerged as
a significant alternative to traditional capital providers, such as commercial banks and other financial institutions. BDCs are
a type of closed-end fund regulated under the 1940 Act, whose shares are typically listed for trading on a U.S. securities exchange.
BDCs typically invest in and lend to small and medium-sized private and certain public companies that may not have access to public equity
markets for capital raising. Often times, the financing a BDC provides includes an equity-like investment such as warrants or conversion
rights, creating an opportunity for the BDC to participate in capital appreciation in addition to the interest income earned through its
debt investments. The interest earned by a BDC flows through to investors in the form of a dividend, normally without being taxed
at the BDC entity level. Unlike corporations, BDCs are not taxed on income distributed to their shareholders provided they comply
with the applicable requirements of the Internal Revenue Code of 1986. BDCs are unique in that at least 70% of their investments
must be made in private and certain public U.S. businesses, and BDCs. are required to make available significant managerial assistance
to their portfolio companies. The securities of BDCs, which are required to distribute substantially all of their income on an annual
basis to investors in order to not be subject to entity level taxation, often offer a yield advantage over securities of other issuers,
such as corporations, that are taxed on income at the entity level and are able to retain all of a portion of their income rather than
distributing it to investors. The Fund invests primarily in BDC shares which are trading in the secondary market on a U.S. securities
exchange but may, in certain circumstances, invest in an initial public offering of BDC shares or invest in certain debt instruments issued
by BDCs. The Fund will indirectly bear its proportionate share of any management and other expense, and of any performance based
or incentive fees, charged by the BDCs in which it invests, in addition to the expenses paid by the Fund. Other examples of specialty
finance companies include categories of REITs providing commercial or residential mortgage financing or lease financing.
The
Fund engages in the use of financial leverage to seek to enhance the level of its current distributions to common shareholders. The Fund
may use financial leverage through the issuance of preferred shares of beneficial interest and/or borrowings by the Fund.
The
Fund does not intend to enter into derivative transactions as a principal part of its investment strategy. However, the Fund may
enter into derivative transactions to seek to manage the risks of the Fund’s portfolio securities or for other purposes to the extent
the Sub-Advisor determines that the use of derivative transactions is consistent with the Fund’s investment objectives and policies
and applicable regulatory requirements. Certain of the Fund’s derivative transactions, if any, may provide investment leverage to
the Fund’s portfolio. 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. Fundamental
Investment Policies
The
Fund, as a fundamental policy, may not:
1)
Purchase any security if, as a result of the purchase, 25% or more of the Fund’s total assets (taken at current value) would be
invested in the securities of borrowers and other issuers having their principal business activities in the same industry; provided, that
this limitation shall not apply with respect to securities of companies within industries in the financial sector or obligations issued
or guaranteed by the U.S. government or by its agencies or instrumentalities;
2)
Borrow money except as permitted by the 1940 Act, the rules thereunder and interpretations thereof or pursuant to a Securities and Exchange
Commission exemptive order;
3)
Issue senior securities, as defined in the 1940 Act, other than: (i) Preferred Shares which immediately after issuance will have asset
coverage of at least 200%; (ii) indebtedness which immediately after issuance will have asset coverage of at least 300%; (iii) the borrowings
permitted by investment restriction 2 above; or (iv) pursuant to a Securities and Exchange Commission exemptive order;
4)
Make loans of funds or other assets, other than by entering into repurchase agreements, lending portfolio securities and through the purchase
of debt securities in accordance with its investment objectives, policies and limitations;
5)
Act as underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an underwriter within
the meaning of the Securities Act of 1933 in connection with the purchase and sale of portfolio securities;
6)
Purchase or sell real estate, but this shall not prevent the Fund from investing in securities of companies that deal in real estate or
are engaged in the real estate business, including real estate investment trusts, and securities secured by real estate or interests therein
and the Fund may hold and sell real estate or mortgages on real estate acquired through default, liquidation, or other distributions of
an interest in real estate as a result of the Fund’s ownership of such securities; and
7)
Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not
prevent the Fund from purchasing or selling options, futures contracts or derivative instruments or from investing in securities or other
instruments backed by physical commodities).
The
reference to “securities of borrowers” under fundamental investment policy restriction #1 above refers to investments in issuers
of debt portfolio securities. The companies within the group of industries in the financial sector in which the Fund concentrates its
investments are comprised of specialty finance companies, banks, savings institutions, brokerage firms, investment management companies,
insurance companies, holding companies of the foregoing and companies that provide related services to such companies.
Except
as noted above, the foregoing fundamental investment policies, together with the investment objectives of the Fund, cannot be changed
without approval by holders of a majority of the outstanding voting securities of the Fund, as defined in the 1940 Act, which includes
common shares and Preferred Shares, if any, voting together as a single class, and of the holders of the outstanding Preferred Shares,
if any, voting as a single class. Under the 1940 Act, a “majority of the outstanding voting securities” means the vote of:
(A) 67% or more of the Fund’s shares present at a meeting, if the holders of more than 50% of the Fund’s shares are present
or represented by proxy; or (B) more than 50% of the Fund’s shares, whichever is less. The remainder of the Fund’s investment
policies, including its investment strategy, are considered non-fundamental and may be changed by the Board of Trustees without shareholder
approval; provided, that shareholders receive at least 60 days’ prior written notice of any such change adopted by the Board of
Trustees.
|
||||||||||||
| Risk Factors [Table Text Block] | Principal
Risks
The
Fund is a closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund
is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance
that the Fund will achieve its investment objectives. The following discussion summarizes the principal risks associated with investing
in the Fund, which includes the risk that you could lose some or all of your investment in the Fund. The Fund is subject to the informational
requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940 and, in accordance therewith, files reports,
proxy statements and other information that is available for review.
Business
Development Company (“BDC”) Risk. The Fund invests in closed-end funds that have elected
to be treated as BDCs. Investments in BDCs may be subject to a high degree of risk. BDCs typically invest in small and medium-sized private
and certain public companies that may not have access to public equity markets or capital raising, and investments in these companies
present a greater risk of loss due to the companies’ youth and limited track record. BDCs are also generally more susceptible to
competition and economic and market changes due to limited products and market shares. A BDC’s portfolio could include a substantial
amount of securities purchased in private placements, and its portfolio may carry risks similar to those of a private equity or venture
capital fund. Securities
that are not publicly registered may be difficult to value and may be difficult to sell at a price representative of their intrinsic value.
Investments in BDCs are subject to various risks, including management’s ability to meet the BDC’s investment objective, and
to manage the BDC’s portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors’
perceptions regarding a BDC or its underlying investments change. Certain BDCs in which the Fund invests employ the use of leverage in
their portfolios through borrowings or in the issuance of preferred stock. While leverage often serves to increase the yield of a BDC,
the leverage also subjects the BDC to increased risks, including the likelihood of increased volatility and the possibility that the BDC’s
common share income will fall if the dividend rate on any preferred shares or the interest rate on any borrowings rises. In addition,
the market price for BDCs, together with other dividend paying stocks, may be negatively affected by a rise in interest rates. Alternatively,
declining interest rates could adversely impact the earnings of BDCs in which the Fund invests, as new loan originations would likely
be made at lower yields. BDC shares are not redeemable at the option of the BDC shareholder and, as with shares of other closed-end funds,
they may trade in the secondary market at a discount to their NAV.
Current
Market Conditions Risk. Current market conditions risk is the risk that a particular investment, or
shares of the Fund in general, may fall in value due to current market conditions. As a means to fight inflation, which remains at elevated
levels, the Federal Reserve and certain foreign central banks have raised interest rates and expect to continue to do so, and the Federal
Reserve has announced that it intends to reverse previously implemented quantitative easing. U.S. regulators have proposed several changes
to market and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s
ability to achieve its investment strategies or make certain investments. Recent and potential future bank failures could result in disruption
to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole, which
may also heighten market volatility and reduce liquidity. The ongoing adversarial political climate in the United States, as well as political
and diplomatic events both domestic and abroad, have and may continue to have an adverse impact the U.S. regulatory landscape, markets
and investor behavior, which could have a negative impact on the Fund’s investments and operations. Other unexpected political,
regulatory and diplomatic events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial
markets and the broader economy. For example, in February 2022, Russia invaded Ukraine which has caused and could continue to cause significant
market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting
from those hostilities have and could continue to have a significant impact on certain Fund investments as well as Fund performance and
liquidity. The economies of the United States and its trading partners, as well as the financial markets generally, may be adversely impacted
by trade disputes and other matters. For example, the United States has imposed trade barriers and restrictions on China. In addition,
the Chinese government is engaged in a longstanding dispute with Taiwan, continually threatening an invasion. If the political climate
between the United States and China does not improve or continues to deteriorate, if China were to attempt invading Taiwan, or if other
geopolitical conflicts develop or worsen, economies, markets and individual securities may be adversely affected, and the value of the
Fund’s assets may go down. The COVID-19 global pandemic, or any future public health crisis, and the ensuing policies enacted by
governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets,
negatively impacting global growth prospects. While vaccines have been developed, there is no guarantee that vaccines will be effective
against emerging future variants of the disease. As this global pandemic illustrated, such events may affect certain geographic regions,
countries, sectors and industries more significantly than others. Advancements in technology may also adversely impact markets and the
overall performance of the Fund. For instance, the economy may be significantly impacted by the advanced development and increased regulation
of artificial intelligence. These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s
portfolio investments and could result in disruptions in the trading markets.
Cyber
Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security.
A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information,
suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber
security breaches. The Fund has established risk management systems designed to reduce the risks associated with cyber security. However,
there is no guarantee that such efforts will succeed, especially because the Fund does not directly control the cyber security systems
of issuers or third party service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents
in the future.
Financial
Sector Concentration Risk. Under normal market conditions, the Fund concentrates its investments (i.e.,
invests at least 25% of its total assets) in securities of companies within industries in the financial sector. A fund concentrated in
a single industry or sector is likely to present more risks than a fund that is broadly diversified over several industries or groups
of industries. Compared to the broad market, an individual sector may be more strongly affected by changes in the economic climate, broad
market shifts, moves in
a particular dominant stock, or regulatory changes. Specialty finance and other financial companies in general are subject to extensive
government regulation, which may change frequently. The profitability of specialty finance and other financial companies is largely dependent
upon the availability and cost of capital funds, and may fluctuate significantly in response to changes in interest rates, as well as
changes in general economic conditions. From time to time, severe competition may also affect the profitability of specialty finance and
other financial companies. Financial companies can be highly dependent upon access to capital markets and any impediments to such access,
such as general economic conditions or a negative perception in the capital markets of a company’s financial condition or prospects,
could adversely affect its business. Leasing companies may be negatively impacted by changes in tax laws which affect the types of transactions
in which such companies engage.
Illiquid
Securities Risk. The Fund may invest in securities that are considered to be illiquid securities. Illiquid
securities may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The market price
of illiquid securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the Fund
pays for or recovers upon the sale of such securities. Illiquid securities are also more difficult to value, especially in challenging
markets.
Income
and Interest Rate Risk. The income common shareholders receive from the Fund is based primarily on the
dividends and interest it earns from its investments, which can vary widely over the short and long-term. If prevailing market interest
rates drop, distribution rates of the Fund’s portfolio holdings may decline which then may adversely affect the Fund’s distributions
on its common shares as well. The Fund’s income also would likely be adversely affected when prevailing short-term interest rates
increase and the Fund is utilizing leverage.
Leverage
Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains
from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares
will be less than if leverage had not been used. Leverage involves risks and special considerations for common shareholders including:
(i) the likelihood of greater volatility of net asset value and market price of the common shares than a comparable portfolio without
leverage; (ii) the risk that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result
in fluctuations in the dividends paid on the common shares; (iii) in a declining market, the use of leverage is likely to cause a greater
decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the
market price of the common shares; and (iv) when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor
and by the Advisor to the Sub-Advisor will be higher than if the Fund did not use leverage. To the extent the Fund uses leverage and invests
in BDCs that also use leverage, the risks associated with leverage will be magnified, potentially significantly.
Management
Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends
upon the continued contributions of certain key employees of the Advisor and Sub-Advisor, some of whom have unique talents and experience
and would be difficult to replace. The loss or interruption of the services of a key member of the portfolio management team could have
a negative impact on the Fund.
Market
Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently
trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset
value.
Market
Risk. Investments held by the Fund, as well as shares of the Fund itself, are subject to market fluctuations
caused by real or perceived adverse economic conditions, political events, regulatory factors or market developments, changes in interest
rates and perceived trends in securities prices. Shares of the Fund could decline in value or underperform other investments as a result
of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism,
market manipulation, government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments, the imposition
of sanctions and other similar measures, spread of infectious diseases or other public health issues, recessions, or other events could
have a significant negative impact on the Fund and its investments. Any of such circumstances could have a materially negative impact
on the value of the Fund’s shares, the liquidity of an investment, and result in increased market volatility. During any such events,
the Fund’s shares may trade at increased premiums or discounts to their net asset value the bid/ask spread on the Fund’s shares
may widen and the returns on investment may fluctuate.
Operational
Risk. The Fund is subject to risks arising from various operational factors, including, but not
limited to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other
third-parties, failed or inadequate processes and technology or systems failures. The Fund relies on third parties for a range of
services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect the
Fund’s ability to meet its investment objective. Although the Fund and the Advisor seek to reduce these operational risks
through controls and procedures, there is no way to completely protect against such risks.
Potential
Conflicts of Interest Risk. First Trust, Confluence and the portfolio managers have interests which
may conflict with the interests of the Fund. In particular, First Trust and Confluence currently manage and may in the future manage and/or
advise other investment
funds or accounts with the same or substantially similar investment objective and strategies as the Fund. In addition, while the Fund
is using leverage, the amount of the fees paid to First Trust (and by First Trust to Confluence) for investment advisory and management
services are higher than if the Fund did not use leverage because the fees paid are calculated based on managed assets. Therefore, First
Trust and Confluence have a financial incentive to leverage the Fund.
REIT,
Mortgage-Related and Asset-Backed Securities Risk. Investing in REITs involves certain unique risks
in addition to investing in the real estate industry in general. REITs are subject to interest rate risk (especially mortgage REITs) and
the risk of default by lessees or borrowers. An equity REIT may be affected by changes in the value of the underlying properties owned
by the REIT. A mortgage REIT may be affected by the ability of the issuers of its portfolio of mortgages to repay their obligations. REITs
whose underlying assets are concentrated in properties used by a particular industry are also subject to risks associated with such industry.
REITs may have limited financial resources, their securities may trade less frequently and in a limited volume, and their securities may
be subject to more abrupt or erratic price movements than larger company securities.
In
addition to REITs, the Fund may invest in a variety of other mortgage-related securities, including commercial mortgage securities and
other mortgage-backed instruments. Mortgage-related securities are susceptible to adverse economic, political or regulatory events that
affect the value of real estate. Mortgage-related securities are also significantly affected by other factors such as borrower defaults,
delinquencies, realized or liquidation losses and other shortfalls. Rising interest rates tend to extend the duration of mortgage-related
securities, making them more sensitive to changes in interest rates, and may reduce the market value of the securities. In addition, mortgage-related
securities are subject to prepayment risk, the risk that borrowers may pay off their mortgages sooner than expected, particularly when
interest rates decline. This can reduce the Fund’s returns because the Fund may have to reinvest that money at lower prevailing
interest rates.
The
Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-backed securities,
as well as additional risks associated with the nature of the assets and the servicing of those assets. In general, mortgage-related securities
and asset-backed securities are subject to credit risk, extension risk, interest rate risk, liquidity risk and valuation risk.
Reorganization
Risk. The Board of Trustees of the Fund has approved the reorganization of the Fund into AOD. If approved
by shareholders, the transaction is anticipated to be consummated during 2024, subject to the satisfaction of applicable regulatory requirements
and approvals and customary closing conditions. There is no assurance when or whether such approvals, or any other approvals required
for the transaction, will be obtained. Under the terms of the proposed transaction, shareholders of the Fund would receive shares of AOD,
which will have its own investment strategies, and thereafter cease to be a shareholder of the Fund. More information on the proposed
transaction, including the risks and considerations associated with the transaction as well as the risks of investing in AOD, is contained
in registration statement/proxy materials. Shareholders should refer to such registration statement/proxy materials, which are available
at https://www.ftportfolios.com/LoadContent/gohdcqj3gy4y.
Specialty
Finance and Other Financial Companies Risks. The profitability of specialty finance and other financial
companies in which the Fund may invest is largely dependent upon the availability and cost of capital, and may fluctuate significantly
in response to changes in interest rates, as well as changes in general economic conditions. Any impediments to a specialty finance or
other financial company’s access to capital markets, such as those caused by general economic conditions or a negative perception
in the capital markets or the company’s financial condition or prospects, could adversely affect such company’s business.
From time to time, severe competition may also affect the profitability of specialty finance and other financial companies. Specialty
finance and other financial companies are subject to rapid business changes, significant competition, value fluctuations due to the concentration
of loans in particular industries significantly affected by economic conditions (such as real estate or energy) and volatile performance
based upon the availability and cost of capital and prevailing interest rates. In addition, credit and other losses resulting from the
financial difficulties of borrowers or other third parties potentially may have an adverse effect on companies in these industries.
Valuation
Risk. The valuation of the Fund’s investments may carry more risk than that of traditional common
stock. Uncertainties in the conditions of the financial market, unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing.
|
||||||||||||
| Effects of Leverage [Text Block] | Effects
of Leverage
The
aggregate principal amount of borrowings under the committed facility agreement (the “BNP Facility”) with BNP Paribas Prime
Brokerage International, Ltd. represented approximately 13.20% of Managed Assets as of November 30, 2023. Asset coverage with respect
to the borrowings under the BNP Facility was 757.59% and the Fund had $16,400,000 of unutilized funds available for borrowing under the
BNP Facility as of that date. Outstanding balances under the BNP Facility generally accrue interest at a variable annual
rate equal to the SOFR Plus 95 basis points. As of November 30, 2023, the rate was 6.26%. As of November 30, 2023, the Fund had $8,600,000
outstanding under the BNP Facility. In addition, under the BNP facility, the Fund pays a commitment fee of 0.55% on the undrawn amount.
The total annual interest and fee rate as of November 30, 2023 was 7.31%.
Assuming
that the Fund’s leverage costs remain as described above (at an assumed average annual cost of 7.31%), the annual return that the
Fund’s portfolio must experience (net of estimated expenses) in order to cover its leverage costs would be 0.96%. Of course, these
numbers are merely estimates used for illustration. Actual leverage costs may vary frequently and may be significantly higher or
lower than the rate estimated above.
The
following table is furnished in response to requirements of the Securities and Exchange Commission (“SEC”). It is designed
to illustrate the effect of leverage on Common Share total return, assuming investment portfolio total returns (comprised of income and
changes in the value of securities held in the Fund’s portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio
returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be
experienced by the Fund.
The
table further assumes leverage representing 13.20% of the Fund’s Managed Assets, net of expenses, and the Fund’s current annual
interest and fee rate of 7.31%.
Common
Share total return is composed of two elements: the Common Share dividends paid by the Fund (the amount of which is largely determined
by the net investment income of the Fund after paying dividends or interest on its leverage) and gains or losses on the value of the securities
the Fund owns. As required by SEC rules, the table above assumes that the Fund is more likely to suffer capital losses than to enjoy capital
appreciation. For example, to assume a total return of 0% the Fund must assume that the distributions it receives on its investments are
entirely offset by losses in the value of those securities.
|
||||||||||||
| Annual Interest Rate [Percent] | 7.31% | ||||||||||||
| Annual Coverage Return Rate [Percent] | 0.96% | ||||||||||||
| Effects of Leverage [Table Text Block] |
|
||||||||||||
| Return at Minus Ten [Percent] | (12.63%) | ||||||||||||
| Return at Minus Five [Percent] | (6.87%) | ||||||||||||
| Return at Zero [Percent] | (1.11%) | ||||||||||||
| Return at Plus Five [Percent] | 4.65% | ||||||||||||
| Return at Plus Ten [Percent] | 10.41% | ||||||||||||
| Effects of Leverage, Purpose [Text Block] | The
following table is furnished in response to requirements of the Securities and Exchange Commission (“SEC”). It is designed
to illustrate the effect of leverage on Common Share total return, assuming investment portfolio total returns (comprised of income and
changes in the value of securities held in the Fund’s portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio
returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be
experienced by the Fund.
The
table further assumes leverage representing 13.20% of the Fund’s Managed Assets, net of expenses, and the Fund’s current annual
interest and fee rate of 7.31%.
|
||||||||||||
| Share Price | $ 3.35 | ||||||||||||
| NAV Per Share | $ 3.94 | ||||||||||||
| Latest Premium (Discount) to NAV [Percent] | (14.97%) | ||||||||||||
| Capital Stock, Long-Term Debt, and Other Securities [Abstract] | |||||||||||||
| Outstanding Security, Title [Text Block] | Common Shares outstanding (unlimited number of Common Shares has been authorized) | ||||||||||||
| Outstanding Security, Held [Shares] | shares | 14,367,591 | ||||||||||||
| Document Period End Date | Nov. 30, 2023 | ||||||||||||
| Business Development Company B D C Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Business
Development Company (“BDC”) Risk. The Fund invests in closed-end funds that have elected
to be treated as BDCs. Investments in BDCs may be subject to a high degree of risk. BDCs typically invest in small and medium-sized private
and certain public companies that may not have access to public equity markets or capital raising, and investments in these companies
present a greater risk of loss due to the companies’ youth and limited track record. BDCs are also generally more susceptible to
competition and economic and market changes due to limited products and market shares. A BDC’s portfolio could include a substantial
amount of securities purchased in private placements, and its portfolio may carry risks similar to those of a private equity or venture
capital fund. Securities
that are not publicly registered may be difficult to value and may be difficult to sell at a price representative of their intrinsic value.
Investments in BDCs are subject to various risks, including management’s ability to meet the BDC’s investment objective, and
to manage the BDC’s portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors’
perceptions regarding a BDC or its underlying investments change. Certain BDCs in which the Fund invests employ the use of leverage in
their portfolios through borrowings or in the issuance of preferred stock. While leverage often serves to increase the yield of a BDC,
the leverage also subjects the BDC to increased risks, including the likelihood of increased volatility and the possibility that the BDC’s
common share income will fall if the dividend rate on any preferred shares or the interest rate on any borrowings rises. In addition,
the market price for BDCs, together with other dividend paying stocks, may be negatively affected by a rise in interest rates. Alternatively,
declining interest rates could adversely impact the earnings of BDCs in which the Fund invests, as new loan originations would likely
be made at lower yields. BDC shares are not redeemable at the option of the BDC shareholder and, as with shares of other closed-end funds,
they may trade in the secondary market at a discount to their NAV.
|
||||||||||||
| Current Market Conditions Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Current
Market Conditions Risk. Current market conditions risk is the risk that a particular investment, or
shares of the Fund in general, may fall in value due to current market conditions. As a means to fight inflation, which remains at elevated
levels, the Federal Reserve and certain foreign central banks have raised interest rates and expect to continue to do so, and the Federal
Reserve has announced that it intends to reverse previously implemented quantitative easing. U.S. regulators have proposed several changes
to market and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s
ability to achieve its investment strategies or make certain investments. Recent and potential future bank failures could result in disruption
to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole, which
may also heighten market volatility and reduce liquidity. The ongoing adversarial political climate in the United States, as well as political
and diplomatic events both domestic and abroad, have and may continue to have an adverse impact the U.S. regulatory landscape, markets
and investor behavior, which could have a negative impact on the Fund’s investments and operations. Other unexpected political,
regulatory and diplomatic events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial
markets and the broader economy. For example, in February 2022, Russia invaded Ukraine which has caused and could continue to cause significant
market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting
from those hostilities have and could continue to have a significant impact on certain Fund investments as well as Fund performance and
liquidity. The economies of the United States and its trading partners, as well as the financial markets generally, may be adversely impacted
by trade disputes and other matters. For example, the United States has imposed trade barriers and restrictions on China. In addition,
the Chinese government is engaged in a longstanding dispute with Taiwan, continually threatening an invasion. If the political climate
between the United States and China does not improve or continues to deteriorate, if China were to attempt invading Taiwan, or if other
geopolitical conflicts develop or worsen, economies, markets and individual securities may be adversely affected, and the value of the
Fund’s assets may go down. The COVID-19 global pandemic, or any future public health crisis, and the ensuing policies enacted by
governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets,
negatively impacting global growth prospects. While vaccines have been developed, there is no guarantee that vaccines will be effective
against emerging future variants of the disease. As this global pandemic illustrated, such events may affect certain geographic regions,
countries, sectors and industries more significantly than others. Advancements in technology may also adversely impact markets and the
overall performance of the Fund. For instance, the economy may be significantly impacted by the advanced development and increased regulation
of artificial intelligence. These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s
portfolio investments and could result in disruptions in the trading markets.
|
||||||||||||
| Cyber Security Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Cyber
Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security.
A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information,
suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber
security breaches. The Fund has established risk management systems designed to reduce the risks associated with cyber security. However,
there is no guarantee that such efforts will succeed, especially because the Fund does not directly control the cyber security systems
of issuers or third party service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents
in the future.
|
||||||||||||
| Financial Sector Concentration Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Financial
Sector Concentration Risk. Under normal market conditions, the Fund concentrates its investments (i.e.,
invests at least 25% of its total assets) in securities of companies within industries in the financial sector. A fund concentrated in
a single industry or sector is likely to present more risks than a fund that is broadly diversified over several industries or groups
of industries. Compared to the broad market, an individual sector may be more strongly affected by changes in the economic climate, broad
market shifts, moves in
a particular dominant stock, or regulatory changes. Specialty finance and other financial companies in general are subject to extensive
government regulation, which may change frequently. The profitability of specialty finance and other financial companies is largely dependent
upon the availability and cost of capital funds, and may fluctuate significantly in response to changes in interest rates, as well as
changes in general economic conditions. From time to time, severe competition may also affect the profitability of specialty finance and
other financial companies. Financial companies can be highly dependent upon access to capital markets and any impediments to such access,
such as general economic conditions or a negative perception in the capital markets of a company’s financial condition or prospects,
could adversely affect its business. Leasing companies may be negatively impacted by changes in tax laws which affect the types of transactions
in which such companies engage.
|
||||||||||||
| Illiquid Securities Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Illiquid
Securities Risk. The Fund may invest in securities that are considered to be illiquid securities. Illiquid
securities may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The market price
of illiquid securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the Fund
pays for or recovers upon the sale of such securities. Illiquid securities are also more difficult to value, especially in challenging
markets.
|
||||||||||||
| Interest And Income Rate Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Income
and Interest Rate Risk. The income common shareholders receive from the Fund is based primarily on the
dividends and interest it earns from its investments, which can vary widely over the short and long-term. If prevailing market interest
rates drop, distribution rates of the Fund’s portfolio holdings may decline which then may adversely affect the Fund’s distributions
on its common shares as well. The Fund’s income also would likely be adversely affected when prevailing short-term interest rates
increase and the Fund is utilizing leverage.
|
||||||||||||
| Leverage Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Leverage
Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains
from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares
will be less than if leverage had not been used. Leverage involves risks and special considerations for common shareholders including:
(i) the likelihood of greater volatility of net asset value and market price of the common shares than a comparable portfolio without
leverage; (ii) the risk that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result
in fluctuations in the dividends paid on the common shares; (iii) in a declining market, the use of leverage is likely to cause a greater
decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the
market price of the common shares; and (iv) when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor
and by the Advisor to the Sub-Advisor will be higher than if the Fund did not use leverage. To the extent the Fund uses leverage and invests
in BDCs that also use leverage, the risks associated with leverage will be magnified, potentially significantly.
|
||||||||||||
| Management Risk And Reliance On Key Personnel [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Management
Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends
upon the continued contributions of certain key employees of the Advisor and Sub-Advisor, some of whom have unique talents and experience
and would be difficult to replace. The loss or interruption of the services of a key member of the portfolio management team could have
a negative impact on the Fund.
|
||||||||||||
| Market Discount From Net Asset Value [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Market
Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently
trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset
value.
|
||||||||||||
| Market Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Market
Risk. Investments held by the Fund, as well as shares of the Fund itself, are subject to market fluctuations
caused by real or perceived adverse economic conditions, political events, regulatory factors or market developments, changes in interest
rates and perceived trends in securities prices. Shares of the Fund could decline in value or underperform other investments as a result
of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism,
market manipulation, government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments, the imposition
of sanctions and other similar measures, spread of infectious diseases or other public health issues, recessions, or other events could
have a significant negative impact on the Fund and its investments. Any of such circumstances could have a materially negative impact
on the value of the Fund’s shares, the liquidity of an investment, and result in increased market volatility. During any such events,
the Fund’s shares may trade at increased premiums or discounts to their net asset value the bid/ask spread on the Fund’s shares
may widen and the returns on investment may fluctuate.
|
||||||||||||
| Operational Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Operational
Risk. The Fund is subject to risks arising from various operational factors, including, but not
limited to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other
third-parties, failed or inadequate processes and technology or systems failures. The Fund relies on third parties for a range of
services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect the
Fund’s ability to meet its investment objective. Although the Fund and the Advisor seek to reduce these operational risks
through controls and procedures, there is no way to completely protect against such risks.
|
||||||||||||
| Potential Conflicts Of Interest Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Potential
Conflicts of Interest Risk. First Trust, Confluence and the portfolio managers have interests which
may conflict with the interests of the Fund. In particular, First Trust and Confluence currently manage and may in the future manage and/or
advise other investment
funds or accounts with the same or substantially similar investment objective and strategies as the Fund. In addition, while the Fund
is using leverage, the amount of the fees paid to First Trust (and by First Trust to Confluence) for investment advisory and management
services are higher than if the Fund did not use leverage because the fees paid are calculated based on managed assets. Therefore, First
Trust and Confluence have a financial incentive to leverage the Fund.
|
||||||||||||
| R E I T Mortgage Related And Asset Backed Securities Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | REIT,
Mortgage-Related and Asset-Backed Securities Risk. Investing in REITs involves certain unique risks
in addition to investing in the real estate industry in general. REITs are subject to interest rate risk (especially mortgage REITs) and
the risk of default by lessees or borrowers. An equity REIT may be affected by changes in the value of the underlying properties owned
by the REIT. A mortgage REIT may be affected by the ability of the issuers of its portfolio of mortgages to repay their obligations. REITs
whose underlying assets are concentrated in properties used by a particular industry are also subject to risks associated with such industry.
REITs may have limited financial resources, their securities may trade less frequently and in a limited volume, and their securities may
be subject to more abrupt or erratic price movements than larger company securities.
In
addition to REITs, the Fund may invest in a variety of other mortgage-related securities, including commercial mortgage securities and
other mortgage-backed instruments. Mortgage-related securities are susceptible to adverse economic, political or regulatory events that
affect the value of real estate. Mortgage-related securities are also significantly affected by other factors such as borrower defaults,
delinquencies, realized or liquidation losses and other shortfalls. Rising interest rates tend to extend the duration of mortgage-related
securities, making them more sensitive to changes in interest rates, and may reduce the market value of the securities. In addition, mortgage-related
securities are subject to prepayment risk, the risk that borrowers may pay off their mortgages sooner than expected, particularly when
interest rates decline. This can reduce the Fund’s returns because the Fund may have to reinvest that money at lower prevailing
interest rates.
The
Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-backed securities,
as well as additional risks associated with the nature of the assets and the servicing of those assets. In general, mortgage-related securities
and asset-backed securities are subject to credit risk, extension risk, interest rate risk, liquidity risk and valuation risk.
|
||||||||||||
| Reorganization Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Reorganization
Risk. The Board of Trustees of the Fund has approved the reorganization of the Fund into AOD. If approved
by shareholders, the transaction is anticipated to be consummated during 2024, subject to the satisfaction of applicable regulatory requirements
and approvals and customary closing conditions. There is no assurance when or whether such approvals, or any other approvals required
for the transaction, will be obtained. Under the terms of the proposed transaction, shareholders of the Fund would receive shares of AOD,
which will have its own investment strategies, and thereafter cease to be a shareholder of the Fund. More information on the proposed
transaction, including the risks and considerations associated with the transaction as well as the risks of investing in AOD, is contained
in registration statement/proxy materials. Shareholders should refer to such registration statement/proxy materials, which are available
at https://www.ftportfolios.com/LoadContent/gohdcqj3gy4y.
|
||||||||||||
| Speciality Finance And Other Financial Companies Risks [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Specialty
Finance and Other Financial Companies Risks. The profitability of specialty finance and other financial
companies in which the Fund may invest is largely dependent upon the availability and cost of capital, and may fluctuate significantly
in response to changes in interest rates, as well as changes in general economic conditions. Any impediments to a specialty finance or
other financial company’s access to capital markets, such as those caused by general economic conditions or a negative perception
in the capital markets or the company’s financial condition or prospects, could adversely affect such company’s business.
From time to time, severe competition may also affect the profitability of specialty finance and other financial companies. Specialty
finance and other financial companies are subject to rapid business changes, significant competition, value fluctuations due to the concentration
of loans in particular industries significantly affected by economic conditions (such as real estate or energy) and volatile performance
based upon the availability and cost of capital and prevailing interest rates. In addition, credit and other losses resulting from the
financial difficulties of borrowers or other third parties potentially may have an adverse effect on companies in these industries.
|
||||||||||||
| Valuation Risk [Member] | |||||||||||||
| General Description of Registrant [Abstract] | |||||||||||||
| Risk [Text Block] | Valuation
Risk. The valuation of the Fund’s investments may carry more risk than that of traditional common
stock. Uncertainties in the conditions of the financial market, unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing.
|
1 Year First Trust Specialty Fi... Chart |
1 Month First Trust Specialty Fi... Chart |
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