First Trust Alternative Absolute Return Strategy ETF

First Trust Alternative Absolute Return Strategy ETF (FAAR) is an actively managed fund. It bets on commodity futures, such as coffee, corn and nickel, through a Cayman Islands subsidiary, and holds the rest in Treasury bills and cash. It can bet on prices falling as well as rising, and its returns have moved little with stocks. The trade-off is cost: its 0.98% expense ratio is above the 0.64% average of similar funds.

• Over the year to Oct 27, 2026, FAAR returned +19.6%, 3rd of 3 among similar funds.
• Its 5-year annualized return was +7.2% and its 10-year +5.1%.
• In the 2020 COVID crash it fell 3.1% and regained its old high 1.9 months after the low.
• Its worst full calendar year was 2018 (-9.2%); its best was 2021 (+12.3%).
• The deepest fall in its price history was 18% (Jun 9, 2022 to Apr 8, 2025), recovered by Jan 13, 2026.

As of Jun 30, 2026, the fund held 4 securities; the ten largest made up 36.33% of assets, and 57.58% sat in cash and money-market holdings.

The bonds mature in 0.1 years on average (weighted by size), with an average coupon of 0%.

• Over the three months to Jun 30, 2026, investors added a net $16.7M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +1.48%, -1.23%, -6.34%.

FAAR does not track an index. First Trust Advisors, its manager, decides which commodity futures to hold. A futures contract is an agreement to buy or sell a commodity at a set price on a future date. The fund can go long, which pays off if a price rises, or short, which pays off if it falls. Its stated goal is long-term total return. "Absolute return" means it aims to make money whether prices rise or fall, but nothing guarantees that.

The fund does not hold the futures itself. They sit in a wholly owned subsidiary in the Cayman Islands, which can hold up to 25% of the fund's total assets. This setup gives the fund commodity exposure within US tax rules for funds. When a contract nears its end date, the manager sells it and buys one that ends later. This is called rolling. The manager can also cut back commodity exposure when markets turn risky.

Most of the money sits in low-risk, short-term assets that back the futures. As of June 30, 2026, four Treasury bills maturing between July and September 2026 made up about 36% of net assets, and cash about 58%. The fund also held 26 futures positions. Coffee, corn, nickel, cotton and lead contracts were among the largest. The fund creates and redeems shares for cash, so it may be less tax-efficient than ETFs that do this by exchanging securities.

• FAAR charges 0.98% a year, versus an average of 0.64% for the similar funds below (2nd of 3, cheapest first).
• Of that, 0.95% is the management fee; the rest covers other fund expenses.

Its long-short commodity approach has moved little with stocks, with a one-year beta of -0.14 as of October 27, 2026, and it gained during the 2022 bear market.

FAAR's main appeal is how it held up when stocks fell. In the 2020 COVID crash it lost only 2.4%, and it gained 9.5% while stocks fell in 2022. It launched in 2016, so there is no 2008 record to check. It has had its own slumps. It lost 9.23% in 2018. From a June 2022 peak it fell 18% by April 2025 and did not get back to that peak until January 2026. Anyone who had to sell shares during that stretch would have locked in losses. The trailing yield was 9.33% as of October 27, 2026, paid quarterly. Payouts from commodity funds can change a lot from year to year. The 0.98% expense ratio is a steady cost. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by closest holdings overlap from the latest N-PORT reports (no similar fund shares 20% or more of its holdings).