FAAR | First Trust Alternative Absolute Return Strategy ETF

FAAR ISSUER

First Trust Advisors L.P., the investment advisor for the FAAR issuer, manages an actively traded exchange-traded fund aiming for long-term total returns by employing both long and short investments in exchange-traded commodity futures contracts. These investments are facilitated through a wholly-owned subsidiary organized under Cayman Islands law, allowing the fund to gain exposure to commodity markets within the constraints of federal tax laws governing investment companies. While the fund itself does not directly invest in commodity futures, it achieves exposure through its subsidiary, which has the flexibility to invest without limitation in such futures. With a focus on maintaining a fully invested position, the fund may frequently engage in the process of rolling futures contracts, substituting expiring contracts with those with more distant settlement dates. This active management approach, coupled with potential rebalancing efforts, may result in higher portfolio turnover. Furthermore, the fund, through its subsidiary, conducts trading activities in commodity markets globally, including both U.S. and non-U.S. markets, and may also hold investments denominated in non-U.S. currencies. The remainder of the fund's assets are primarily allocated to U.S. government and agency securities, short-term repurchase agreements, money market instruments, and cash, providing a diversified investment strategy.

FAAR DIVIDEND

First Trust Advisors L.P.'s FAAR dividend policy aims to provide investors with a regular income stream while also potentially capturing capital appreciation opportunities. The dividend distribution is influenced by the fund's investment strategy, which primarily involves actively managing long and short investments in exchange-traded commodity futures contracts through its subsidiary. As the fund seeks to achieve long-term total return, dividend payments may vary based on market conditions, the performance of commodity futures contracts, and the overall portfolio management approach. Investors can anticipate dividends from FAAR reflecting both income generated from the fund's investments and potential capital gains. The dividend distribution may be subject to fluctuations, particularly given the fund's active trading approach and its exposure to commodity markets globally. Additionally, dividend payments may be impacted by factors such as interest rates, currency fluctuations, and changes in commodity prices. Overall, FAAR aims to provide investors with a balanced combination of income and capital appreciation through its dividend policy, reflecting the dynamic nature of its investment strategy.

FAAR TRACKING

First Trust Advisors L.P.'s FAAR employs a tracking strategy to closely monitor and replicate the performance of its underlying index, which consists of exchange-traded commodity futures contracts. The fund utilizes sophisticated tracking methodologies to ensure that its performance closely mirrors that of the index it seeks to track. This involves carefully managing the composition of its portfolio to maintain alignment with the index's holdings and weightings. Additionally, the fund may employ derivative instruments and other investment techniques to help achieve precise tracking. Continuous monitoring and adjustments are made to ensure minimal tracking error, which is the variance between the fund's performance and that of its underlying index. By diligently adhering to its tracking strategy, FAAR aims to provide investors with a reliable and consistent means of gaining exposure to commodity markets while minimizing tracking deviations.

FAAR CORRELATION

First Trust Advisors L.P.'s FAAR aims to manage its correlation with various market factors, particularly those influencing commodity prices and financial markets. The fund employs sophisticated risk management techniques to mitigate correlation risks and maintain a diversified portfolio. By investing in a mix of long and short positions in exchange-traded commodity futures contracts through its subsidiary, FAAR seeks to achieve a balanced correlation profile. This strategy allows the fund to potentially benefit from market trends while reducing susceptibility to specific market movements. Additionally, FAAR's investment in other asset classes, such as U.S. government and agency securities, short-term repurchase agreements, money market instruments, and cash, further diversifies its correlation profile. Through active portfolio management and prudent risk mitigation strategies, FAAR endeavors to manage its correlation effectively, providing investors with a resilient investment option across various market conditions.

FAAR SECTOR

First Trust Advisors L.P.'s FAAR focuses on navigating various sectors within the commodity markets through its investment strategy. The fund aims to capture opportunities across different commodity sectors such as energy, agriculture, metals, and others. By actively managing long and short positions in exchange-traded commodity futures contracts through its subsidiary, FAAR can dynamically adjust its exposure to different sectors based on market conditions and investment opportunities. Additionally, FAAR's investment advisor may employ analytical tools and market research to identify sectors poised for growth or experiencing favorable supply-demand dynamics. This approach enables FAAR to potentially capitalize on sector-specific trends while mitigating risks associated with individual commodities. Through its diversified exposure to different sectors within the commodity markets, FAAR seeks to optimize returns for investors while managing sector-specific volatility and risks.

FAAR EXPOSURE

First Trust Advisors L.P.'s FAAR carefully manages its exposure to various asset classes and market factors to achieve its investment objectives. The fund primarily seeks exposure to commodity markets through long and short investments in exchange-traded commodity futures contracts, facilitated by its subsidiary. FAAR's investment strategy allows it to capture potential returns from commodity price movements while managing risks associated with these markets. Additionally, the fund may have exposure to other asset classes such as U.S. government and agency securities, short-term repurchase agreements, money market instruments, and cash, providing diversification benefits. FAAR's exposure to commodity markets is actively monitored and adjusted by its investment advisor based on market conditions, ensuring alignment with its investment objectives and risk management parameters. Through its strategic approach to exposure management, FAAR aims to optimize returns for investors while prudently managing risk.