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First Trust Alternative Absolute Return Strategy ETF (FAAR)
Investment Objective/Strategy - The First Trust Alternative Absolute Return Strategy ETF is an actively managed exchange-traded fund that seeks to provide investors with long-term total return.
There can be no assurance that the Fund's investment objectives will be achieved.
Fund Overview
TickerFAAR
Fund TypeAlternative Investments
Investment AdvisorFirst Trust Advisors L.P.
Investor Servicing AgentBrown Brothers Harriman
CUSIP33740Y101
ISINUS33740Y1010
Intraday NAVFAARIV
Fiscal Year-End12/31
ExchangeNasdaq
Inception5/18/2016
Inception Price$30.00
Inception NAV$30.00
Expense Ratio0.95%
Current Fund Data (as of 11/20/2017)
Closing NAV1$29.74
Closing Share Price2$29.72
Bid/Ask Midpoint$29.74
Bid/Ask Premium0.01%
Total Net Assets$7,434,524
Outstanding Shares250,002
Daily Volume2,074
Average 30-Day Daily Volume4,864
Closing Share Price 52-Week High/Low$30.50 / $28.41
Closing NAV 52-Week High/Low$29.93 / $27.91
Top Holdings - Long Exposure (as of 11/20/2017)*
Holding Percent
U.S. Treasury Bill, 0%, due 11/30/2017 26.90%
U.S. Treasury Bill, 0%, due 12/14/2017 13.44%
Low Su Gasoil G Dec17 8.23%
GASOLINE RBOB FUT Jan18 6.87%
BRENT CRUDE FUTR Feb18 6.68%
SOYBEAN MEAL FUTR Jan18 6.06%
GOLD 100 OZ FUTR Feb18 5.16%
SOYBEAN FUTURE Jan18 4.66%
SILVER FUTURE Mar18 4.56%
NY Harb ULSD Fut Jan18 4.37%

* Excluding cash.  Holdings are subject to change.

Top Holdings - Short Exposure (as of 11/20/2017)*
Holding Percent
KC HRW WHEAT FUT Dec17 -7.27%
WHEAT FUTURE(CBT) Dec17 -5.96%
NATURAL GAS FUTR Dec17 -3.28%
CORN FUTURE Dec17 -3.25%
LEAN HOGS FUTURE Dec17 -2.67%
COFFEE 'C' FUTURE Mar18 -2.54%
COTTON NO.2 FUTR Mar18 -0.95%

* Excluding cash.  Holdings are subject to change.

NAV History (Since Inception)
Past performance is not indicative of future results.
Bid/Ask Midpoint vs. NAV (as of 9/30/2017)
Number of Days Bid/Ask Midpoint Above NAV
Quarter Ended 0-49
Basis Points
50-99
Basis Points
100-199
Basis Points
>=200
Basis Points
9/30/2017 8 7 26 0
6/30/2017 9 20 17 7
3/31/2017 13 37 0 0
12/31/2016 21 24 0 0
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49
Basis Points
50-99
Basis Points
100-199
Basis Points
>=200
Basis Points
9/30/2017 12 9 1 0
6/30/2017 6 4 0 0
3/31/2017 7 4 1 0
12/31/2016 15 3 0 0

The price used to calculate market return is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange, on which shares of the Fund are listed for trading, as of the time that the Fund's NAV is calculated.

Fund Exposure (as of 11/20/2017)
Long Exposure72.33%
Short Exposure-25.92%
Net Exposure46.41%
Month End Performance (as of 10/31/2017)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception3
Fund Performance *
Net Asset Value (NAV) 5.87% 3.97% 2.60% N/A N/A N/A -0.96%
After Tax Held 5.87% 3.97% 2.60% N/A N/A N/A -0.96%
After Tax Sold 3.32% 2.25% 1.47% N/A N/A N/A -0.73%
Market Price 5.06% 4.91% 3.10% N/A N/A N/A -0.23%
Index Performance
Bloomberg Commodity Index 2.40% -0.79% 2.35% N/A N/A N/A 1.30%
3 Month U.S. Treasury Bills + 3% 1.03% 3.22% 3.79% N/A N/A N/A 3.68%
S&P 500 Index 4.76% 16.91% 23.63% N/A N/A N/A 19.45%
Quarter End Performance (as of 9/29/2017)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception3
Fund Performance *
Net Asset Value (NAV) 1.65% 1.83% -0.62% N/A N/A N/A -2.52%
After Tax Held 1.65% 1.83% -0.62% N/A N/A N/A -2.52%
After Tax Sold 0.93% 1.03% -0.35% N/A N/A N/A -1.92%
Market Price 0.86% 3.23% 0.89% N/A N/A N/A -1.42%
Index Performance
Bloomberg Commodity Index 2.52% -2.87% -0.29% N/A N/A N/A -0.18%
3 Month U.S. Treasury Bills + 3% 1.02% 2.85% 3.71% N/A N/A N/A 3.64%
S&P 500 Index 4.48% 14.24% 18.61% N/A N/A N/A 18.76%

*Performance data quoted represents past performance. Past performance is not a guarantee of future results and current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and shares when sold or redeemed, may be worth more or less than their original cost.

After Tax Held returns represent return after taxes on distributions. Assumes shares have not been sold. After Tax Sold returns represent the return after taxes on distributions and the sale of fund shares. Returns do not represent the returns you would receive if you traded shares at other times. Market Price returns are based on the midpoint of the bid/ask spread on the stock exchange on which shares of the fund are listed for trading as of the time that the fund’s NAV is calculated. Returns are average annualized total returns, except those for periods of less than one year, which are cumulative.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

Indexes do not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Indexes are unmanaged and an investor cannot invest directly in an index.
The expense ratio for this fund is 0.95%.

Bloomberg Commodity Index - The Index is made up of exchange-traded futures on physical commodities and represents 20 commodities, which are weighted to account for economic significance and market liquidity.

3 Month U.S. Treasury Bills + 3% - The Index is made up of 3 Month U.S. Treasury Bills and a spread of 3 percent accrued daily because the Treasury bill rate can fluctuate over time.

S&P 500 Index - The Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance.

Footnotes
1 The NAV represents the fund's net assets (assets less liabilities) divided by the fund's outstanding shares .
2 Fund shares are purchased and sold on an exchange at their share price rather than net asset value (NAV), which may cause the shares to trade at a price greater than NAV (premium) or less than NAV (discount).
3 Inception Date is 5/18/2016

You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. You can download a prospectus or summary prospectus, or contact First Trust Portfolios L.P. at 1-800-621-1675 to request a prospectus or summary prospectus which contains this and other information about the fund. The prospectus or summary prospectus should be read carefully before investing.

ETF Characteristics

The fund lists and principally trades its shares on The Nasdaq Stock Market LLC.

Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Market prices may differ to some degree from the net asset value of the shares. Investors who sell fund shares may receive less than the share's net asset value. Shares may be sold throughout the day on the exchange through any brokerage account. However, unlike mutual funds, shares may only be redeemed directly from the fund by authorized participants, in very large creation/redemption units. If the fund's authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a discount to the fund's net asset value and possibly face delisting.

Risk Considerations

The fund's shares will change in value, and you could lose money by investing in the fund. One of the principal risks of investing in the fund is market risk. Market risk is the risk that a particular security owned by the fund or shares of the fund in general, may fall in value.

The trading prices of commodities futures, fixed income securities and other instruments fluctuate in response to a variety of factors. The fund's net asset value and market price may fluctuate significantly in response to these factors. As a result, an investor could lose money over short or long periods of time. In addition, the net asset value of the fund may be more volatile over short-term periods than other investment options because of the fund's significant use of financial instruments that have a leveraging effect.

The fund is subject to management risk because it is an actively managed portfolio. In managing the fund’s investment portfolio, the advisor will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that the fund will meet its investment objective.

The fund does not invest directly in futures instruments. Rather, it invests in a wholly owned subsidiary, which will have the same investment objective as the fund, but unlike the fund, it may invest without limitation in futures instruments. The subsidiary is not registered under the 1940 Act and is not subject to all the investor protections of the 1940 Act. Thus, the fund, as an investor in the subsidiary, will not have all the protections offered to investors in registered investment companies.

The failure or bankruptcy of the fund's and the subsidiary's clearing broker could result in a substantial loss of fund assets.

The value of commodities and commodity-linked instruments typically is based upon the price movements of a physical commodity or an economic variable linked to such price movements. The prices of commodities and commodities-linked instruments may fluctuate quickly and dramatically and may not correlate to price movements in other asset classes. An active trading market may not exist for certain commodities. Each of these factors and events could have a significant negative impact on the fund.

All futures and futures-related products are highly volatile. Price movements are influenced by a variety of factors, including: changes in overall economic conditions, changes in interest rates, or factors affecting a particular commodity or industry, such as production, supply, demand, drought, floods, weather, political, economic and regulatory developments. Futures contracts may be less liquid than other types of investments.

The fund regularly purchases and sells commodity futures contracts to maintain a fully invested position. This frequent trading may increase the amount of commissions or mark-ups to broker-dealers that the fund pays when it buys and sells contracts, which may detract from the fund's performance.

The fund currently intends to effect most creations and redemptions, in whole or in part for cash, rather than in-kind securities. As a result, the fund may be less tax-efficient.

The fund, through the subsidiary, will engage in trading on commodity markets outside the U.S. Trading on such markets is not regulated by any U.S. government agency and may involve certain risks not applicable to trading on U.S. exchanges. The subsidiary is subject to portfolio turnover risk, which may result in the fund paying higher levels of transaction costs and generating greater tax liability for shareholders, with the potential to lessen performance. The fund holds investments that are denominated in non-U.S. currencies, or in securities that provide exposure to such currencies, currency exchange rates or interest rates denominated in such currencies. Changes in currency exchange rates and the relative value of non-U.S. currencies may affect the value of the fund's investments and the value of the fund's shares. Commodity futures contracts traded on non-U.S. exchanges or with non-U.S. counterparties present risks because they may not be subject to the same degree of regulation as their U.S. counterparts. The fund intends to treat any income it may derive from commodity futures contracts received by the subsidiary as qualified income, subject to regulatory rules and annual re-examination.

The fund may be subject to the forces of "whipsaw" markets (as opposed to choppy or stable markets), in which significant price movements develop but then repeatedly reverse, which could cause substantial losses.

The fund is classified as "non-diversified" and may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers.

Alternative investments may employ complex strategies, have unique investment and risk characteristics and may not be suitable for all investors.

Shorting may result in greater gains or greater losses. Short selling creates special risks which could result in increased volatility of returns. Because losses on short sales arise from increases in the value of the security sold short, such losses are theoretically unlimited.

Certain securities in the fund are subject to credit risk, interest rate risk, and income risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and that the value of a security may decline as a result. Interest rate risk is the risk that the value of the fixed income securities in the fund will decline because of rising market interest rates. Income risk is the risk that income from the fund’s fixed income investments could decline during periods of falling interest rates.

The fund currently has fewer assets than larger funds, and like other relatively new funds, large inflows and outflows may impact the fund's market exposure for limited periods of time. The fund is subject to gap risk, which is the risk that a commodity price will change from one level to another with no trading in between.

The fund is subject to regulatory risk, which may result in commodity contract positions requiring liquidation at disadvantageous times or prices.

The fund’s investment in repurchase agreements may be subject to market and credit risk with respect to the collateral securing the repurchase agreements.

The fund may invest in U.S. government obligations, including U.S.Treasury obligations and securities. Securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government.

First Trust Advisors L.P. is the adviser to the fund. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund's distributor.

First Trust Advisors L.P. is registered as a commodity pool operator and commodity trading advisor and is also a member of the National Futures Association.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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