Tickers: VFLEX (I SHARE)

  VFLAX (A SHARE)

Fund Objective

The First Trust Alternative Opportunities Fund seeks to achieve long-term capital appreciation by pursuing positive absolute returns across market cycles.

In pursuing its objective, the Fund seeks to generate attractive long-term returns with low sensitivity to traditional equity and fixed income indices.

Benefits of Structure

  • Accessible – No investor accreditation requirements or paperwork
  • Liquidity* – Limited redemptions offered quarterly, daily NAV available for purchase
  • 1099 – Tax Reporting
  • Low Minimum – $1,000

Diversified Returns & Differentiated Access

  • Seeks to complement equity and fixed income exposures as the strategy provides access to and diversification across all alternative market segments within a single, actively managed overall portfolio

Income Focus

  • VFLEX has consistently paid an annual  5% distribution since inception of the fund (paid on a monthly frequency) entirely supported by investment income

Highlights

VFLEX enables ALL investors to gain exposure to Private Equity, Private Credit, Real Estate and Hedge Funds within one comprehensive, streamlined investment vehicle.

FUND HIGHLIGHTS (as of 6/30/22)1

  • Historical Returns: Annualized Return 8.13%
  • Low Volatility: Daily Annualized Volatility 3.20%
  • Current Income: 5% annualized distribution paid monthly, entirely supported by investment income with no return of capital component
  • Equity Diversification: Average return on down equity days, -0.01%2
  • Fixed Income Diversification: Positive returns on down days for bonds, +0.03% 2
  • 25 (out of 27) positive calendar months back to March 2020

Portfolio

Alternative Asset Classes

Alternative Credit

The managers employ a multi-sector approach spanning residential, commercial, corporate, consumer and specialty finance markets. The emphasis is on alternative credit investments, including private loans, illiquid credit and stressed/distressed credit.

Co-Investments

Top co-investment opportunities are typically only available to investors that have substantial allocations to a manager’s existing private vehicle. FTCM sources these opportunities across direct lending, distressed credit, leveraged buyouts, mezzanine equity and growth capital opportunities.

Hedged Strategies

The objective is to construct a balanced portfolio of hedge funds across Arbitrage, Credit, Event Driven, Long/Short Equity and Multi-Strategy managers. The exposure aims to provide a core alternatives exposure that is uncorrelated to stocks and bonds.

Private Equity

The Private Equity sub-strategy seeks to provide exposure to secondary and primary investments in private equity and other private asset funds and, to a limited degree, to direct investments in operating companies.

Real Estate

The managers of the Fund’s Real Estate private funds invest across multiple core real-asset type funds, including industrial, multi-family, retail, and office, in multiple geographies across North America with the potential to expand the holdings to include real-assets in Europe.

Liquid Sub-Strategies

Closed End Fund Arbitrage

The manager of the Closed-End Fund Arbitrage strategy has a core expertise in identifying themes in the closed-end fund (“CEF”) universe that may cause constituents of that universe to trade at discounts or premiums to their underlying net-asset-value.

The team looks for CEFs trading at a material discount to its NAV and then seeks to benefit from mean reversion of those discounts which historically ebb and flow due to cyclical and investor behavioral reasons.

Structured Credit

The manager of the Structured Credit strategy employs a top-down strategy to identify relative valuation opportunities within structured credit markets and a bottom-up credit selection process to selecting individual issuers.

The managers will invest opportunistically across a wide range of credits and issuer types based on relative value within fixed income. Specifically, the strategy targets opportunities in: Residential Mortgage-Backed Securities (RMBS); Commercial Mortgage-Backed Securities (CMBS); Collateralized Loan Obligations (CLOs); and Asset-Backed Securities (ABS).

Performance

Target Allocations

Asset ClassTarget3
Private EquityUp to 30%
Real EstateUp to 30%
Alternative CreditUp to 30%
Hedged StrategiesUp to 30%
Co-InvestmentsUp to 30%

Historical Track Record (as of 6/30/22)4

 JanFebMarAprMayJunJulAugSepOctNovDecYTD
20170.12%0.68%0.20%0.48%0.28%0.20%0.98%2.95%
20180.08%-1.60%-1.86%0.44%1.41%-0.16%0.20%0.36%-0.08%-1.38%0.52%-1.41%-3.48%
20192.30%0.68%0.40%0.72%0.00%1.31%0.77%-0.05%0.69%-0.09%0.38%1.39%8.81%
20200.98% -0.59%-9.57%0.12%2.73%1.31%1.39%1.63%2.82%0.38%2.48%2.84%6.01%
20212.35%0.65%2.03%0.76%2.00%0.75%0.60%1.60%1.00%1.11%0.13%1.18%
15.07%
20220.29%
0.13%
0.78%
0.45% -1.50% -0.61%0.48%

Standardized Performance (%) as of 6/30/22

Net Asset Value (NAV)**Inception Date
3 Month
YTD

1 Year

2 Year

3 Year

Since Fund Inception
VFLEX – Class I Shares6/12/2017
-1.66 -0.48 5.23
13.29
7.70
5.45
Index Performance***
ICE BofA Merrill Lynch 3-Month
US Treasury Bill Index
N/A
0.11
0.14
0.17
0.130.63
1.11
Bloomberg U.S. Aggregate Bond Index
Bond Index
N/A
-4.69-10.35-10.29-5.44
-0.930.85

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 shores when sold or redeemed, may be worth more or less than their original cost. You can obtain performance information which is current through the most recent quarter-end by visiting www.firsttrustcapital.com.

1. Fund mandate and portfolio construction was updated materially on 1/2019 to expand VFLEX to less-liquid alternative investments with unique illiquidity premiums.

2. Equity is represented by the S&P 500 Index and fixed income is represented by the Bloomberg U.S. Aggregate Bond Index.

3. This represents a model portfolio for The First Trust Alternative Opportunities Fund (the “Fund”). The model portfolio is a portfolio that represents FTCM’s view on what the Fund’s portfolio may look like under normal market conditions. The portfolio is actively managed and will seek to achieve its investment objective by utilizing a flexible asset allocation strategy across a wide array of asset classes and sectors. FTCM may choose to focus on countries or regions, asset classes, industries and sectors to the exclusion of others at any time or from time to time based on market conditions and other factors. Model portfolio allocations should not be relied upon as an indicator of future results or used as the basis for investment decisions. Holdings as of 3/31/22 and are subject to change.

4: Fund inception is 6/12/17.

Gross Expense Ratio: 3.27%. Net Expense Ratio: 2.83%. Pursuant to contract, First Trust Capital Management has agreed to waive fees and/or pay Fund expenses to prevent the annual net expense ratio of Class I shares from exceeding 1.25% of the average daily net assets, respectively, excluding 12b-1 distribution and service fees and certain other expenses as described in the prospectus until 11/1/2022. Currently, the net expense ratio is the amount applied to each share’s NAV. Expense limitations may be terminated or modified prior to their expiration only with the approval of the Board of Trustees of First Trust Capital Management.

*While interval funds are required to offer periodic opportunities for share redemption, an investor may not be able to redeem the full quantity of shares desired during a given repurchase window. If investor demand for redemption exceeds 5%, tender offers will be prorated, meaning investors may only receive proportional amounts of the fund.

**NAV represent the Fund’s net assets (assets less liabilities) divided by the Fund’s outstanding shares.

***Performance information for the indexes is for illustrative purposes only and does not represent actual fund performance. Indexes do not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. All Index returns assume that dividends are reinvested when they are received. Indexes are unmanaged and an investor cannot invest directly into an index.

Risk Considerations

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

The Fund’s shares will change in value and you could lose money by investing in the Fund. There can be no assurance that the Fund’s investment objective will be achieved. In managing the Fund’s investment portfolio, the portfolio managers will apply investment techniques and risk analyses that may not have the desired result.

The investment manager and sub-advisors of a multi-managed fund make investment recommendations independently and they may not complement each other. This may result in an increase in the Fund’s portfolio turnover rate and higher transaction costs and risks.

One of the principal risks of investing in a fund is market risk. Market risk is the risk that a particular stock owned by a fund, fund shares or stocks in general may fall in value. 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 could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic has caused and may continue to cause significant volatility and declines in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.

The Fund is structured as an interval fund and has adopted a policy to make quarterly repurchase offers, at per-class NAV, of not less than 5% of the Fund’s outstanding shares on the repurchase request deadline. There is no guarantee that shareholders will be able to sell all the shares that they want to sell in any repurchase offer. If a repurchase offer is oversubscribed, the Fund may repurchase only a pro rata portion of the shares tendered by each shareholder. The repurchase policy will decrease the s·1ze of the Fund over time and may force the Fund to sell assets. It may also reduce the investment opportunities available to it and cause its expense ratio to increase. In addition, the Fund may need to liquidate holdings earlier than desired, potentially resulting in losses and increasing portfolio turnover.

The Fund is subject to limited liquidity since shareholders will not be able to redeem shares daily or on demand. Shares are not transferable, and liquidity is only provided through repurchase offers made quarterly by the Fund. Fund holdings may be or may become illiquid.

A fund classified as “non-diversified” may invest a relatively high percentage of its assets in a limited number of issuers. As a result, a 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.

Certain underlying funds are not registered under the securities laws and their portfolio holdings may not be disclosed. Unregistered funds may have less investor protection and transparency than registered funds.

Because the shares of CEFs cannot be redeemed upon demand, shares of many CEFs will trade on exchanges at market prices rather than net asset value, which may cause the shares to trade at a price greater than NAV (premium) or less than NAV (discount).

The Fund may invest in the shares of other investment funds which involves additional expenses that would not be present in a direct investment in the underlying funds. In addition, the Fund’s investment performance and risks may be related to the investment performance and risks of the underlying funds.

Collateralized loan obligations (“CLOs”) carry additional risks, including, the possibility that distributions from collateral securities will not be adequate to make interest or other payments, the quality of the collateral may decline in value or default, the possibility that the investments in CLOs are subordinate to other classes or tranches, and the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.

Certain fund holdings may be thinly traded or have a limited trading market and as a result may be characterized by the Fund as illiquid securities.

Mortgage-related securities are more susceptible to adverse economic, political or regulatory events that affect the value of real estate. They are also subject to the risk that the rate of mortgage prepayments decreases, which extends the average life of a security and increases the interest rate exposure.

Investments in companies that are the subject of a publicly announced transaction carry the risk the transaction is renegotiated, takes longer to complete than originally planned and that the transaction is never completed. Any such event could cause the Fund to incur a loss. The risk/reward payout of merger arbitrage strategies typically is asymmetric, with the losses in failed transactions often far exceeding the gains in successful transactions.

The stocks of companies that have recently conducted an initial public offering are often subject to price volatility and speculative trading. These stocks may have exhibited above average price appreciation in connection with the initial public offering prior to inclusion in the Fund. The price of stocks included in the Fund may not continue to appreciate and their performance may not replicate the performance exhibited in the past.

The use of derivatives, including futures, options, swap agreements, and forward contracts, can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives.

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

The Fund’s use of leverage may result in losses that exceed the amount originally invested and may accelerate the rates of losses.

The Fund may be subject to the risk that a counterparty will not fulfill its obligations which may result in significant financial loss to the Fund.

Certain securities held by the Fund are subject to call, credit, default, inflation, income, interest rate, extension, and prepayment risks. These risks could result in a decline in a security’s value and/or income, increased volatility as interest rates rise or fall and have an adverse impact on the Fund’s performance.

High yield securities, or “junk” bonds, are less liquid and are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, are considered to be highly speculative.

Repurchase agreements typically involve the acquisition by the Fund of fixed-income securities from a selling financial institution such as a bank or broker-dealer. The Fund may incur a loss if the other party to a repurchase agreement is unwilling or unable to fulfill its contractual obligations to repurchase the underlying security. Reverse repurchase agreements involve the risk that the other party may fail to return the securities in a timely manner or at all. The Fund could lose money if it is unable to recover the securities and/or if the value of collateral held by the Fund, including the value of the investments made with cash collateral, is less than the value of securities.

Securities of micro, small- and mid-capitalization companies may experience greater price volatility and be less liquid than larger, more established companies.

Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers. These risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries.

Changes in currency exchange rates and the relative value of non-US currencies may affect the value of the Fund’s investments and the value of the Fund’s shares.

Stocks with growth characteristics tend to be more volatile than certain other stocks and their prices may fluctuate more dramatically than the overall stock market.

A fund with significant exposure to a single sector may be more affected by an adverse economic or political development than a broadly diversified fund.

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, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.

High portfolio turnover may result in higher levels of transaction costs and may generate greater tax liabilities for shareholders.

The Fund invests in securities with limited or no secondary market and are deemed to be illiquid. Valuation of illiquid securities is extremely limited. Portfolio holdings are priced either on a daily, monthly, and/or quarterly basis utilizing a variety of valuation methods such as proxy, matrix and third-party pricing. The accuracy of these valuations with vary, and actual tender price of the fund may be materially lower than any past valuation.

You should consider the Fund’s investment objectives, risks, and charges and expenses carefully before investing. Contact First Trust Capital Management at 1-800-988-5196 or visit www.firsttrustcapital.com to obtain a prospectus which contains this and other information about the Fund. The prospectus should be read carefully before investing.


Definitions:

Bloomberg U.S. Aggregate Bond Index – The Index covers the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS, ABS, and CMBS. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

ICE BofA 3-Month US Treasury Index – The Index measures the performance of U.S. Treasury securities maturing in 90 days and assumes reinvestment of all income.

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

Volatility is represented by Standard Deviation, which is a measure of price variability (risk).