First Trust FactorFX UCITS ETF

Investment rationale

The fund is a diversifying fixed income ETF designed to deliver total returns with lower correlation to broader equity and bond markets over the medium to long term through exposure to global currencies and related markets. It has a recommended holding period of 5 years and a Summary Risk Indicator of 3 out of 7, described as medium-low risk. It is intended for investors who can bear loss of capital, are not seeking capital preservation or a guarantee, and have knowledge or experience of similar products and financial markets. An investment in the fund should not constitute a substantial proportion of an investment portfolio, indicating a satellite role rather than a core holding.

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How the strategy works

The fund’s objective is to deliver total returns with lower correlation to broader equity and bond markets over the medium to long term through exposure to global currencies and related markets. It is actively managed and invests primarily in sovereign fixed income securities denominated in local currencies of developed and emerging markets, together with currencies or currency-related financial derivative instruments including forward foreign exchange contracts, futures, swaps and options; it may also invest in short-term instruments, cash and cash equivalents. The sovereign fixed income securities may be fixed or floating rate, may be below investment grade, and their average duration is likely to be less than two years; as of 31 August 2026, weighted average duration was 0.47 years and the bond book was entirely in the 0-1 year maturity bucket. The fund uses the Bloomberg Cumulative FX Carry Trade Index for Managed G10 Currencies and a 50/50 blend of that index with the Bloomberg Emerging Carry Index for 8 Emerging Market Currencies for performance purposes only and is not managed in reference to either benchmark. The share class is accumulating, currency trades typically use maturities between one week and twelve months but mainly one to three months, and the recommended holding period is 5 years.

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Investment philosophy

• The fund follows an active multi-factor approach to global currencies and related markets, investing across both developed and emerging markets through sovereign fixed income securities and currency-related instruments.

• The investment universe includes sovereign fixed and floating-rate debt, short-term instruments, cash and cash equivalents, and derivative instruments such as FX forwards, futures, swaps and options; currency trades are typically implemented with maturities of one week to twelve months, mainly one to three months.

• As of 31 August 2026, representative FX exposure was long KRW, NOK, SGD, GBP, ZAR, RON, EUR, AUD, IDR, BRL, MXN, JPY, COP, INR, PHP, CAD, PEN, THB and HUF, while short CHF, SEK, ILS, CZK, CNH and CLP; net foreign exposure was 75.37% and net USD exposure was 24.63%.

• The collateral bond portfolio was concentrated in short-dated U.S. Treasury Notes, with the top holdings all U.S. Treasuries maturing in 2026-2027, 89.43% rated AAA, 10.57% in cash, and 100% of bond maturity exposure in the 0-1 year bucket.

• As of 31 August 2026 portfolio metrics included 41 holdings, weighted average duration of 0.47 years, average long position size of 8.56%, average short position size of -15.97%, bond yield of 3.56%, implied currency carry of 5.28%, and implied yield of 8.84%.

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Distinctive features

The fund is distinct in seeking lower correlation to traditional equity and bond markets through active exposure to global currency factors rather than through conventional domestic fixed income allocation. Its strategy combines developed- and emerging-market currency positioning with a short-duration sovereign bond collateral portfolio, which as of 31 August 2026 consisted primarily of AAA-rated short-dated U.S. Treasuries. The use of both G10 and emerging-market currency opportunity sets broadens the investable universe beyond a pure developed-market carry approach. The ETF structure is UCITS compliant, accumulating, listed on the London Stock Exchange under ticker FTFX, and carries a total expense ratio of 0.75%.

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Risks

The fund has a Summary Risk Indicator of 3 out of 7, described as medium-low risk, and does not include protection from future market performance. The fund is exposed to market risk and may not achieve its objective; the value of shares can fall and investors may lose some or all of their capital. Currency risk is explicitly highlighted because payments may be received in a different currency and returns depend on exchange-rate movements; this is central to the structure because the strategy takes active long and short positions in global currencies using forwards, futures, swaps and options. The fund may invest in below-investment-grade sovereign fixed income securities, and it may invest substantially in cash deposits, cash equivalents, certificates of deposit and money market instruments to facilitate derivative trading. The fund may invest in schemes that are substantially leveraged, and adverse moves in such underlying schemes could significantly affect fund assets.

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Asset manager

The management company is First Trust Global Portfolios Management Limited and the investment manager is First Trust Global Portfolios. First Trust Global Portfolios Management Limited is authorised and regulated by the Central Bank of Ireland and is based at 24 St Stephen’s Green, Dublin 2, D02 EK82, Ireland. The fund is domiciled in Ireland, is UCITS compliant, and is structured as a sub-fund of First Trust Global Funds ICAV.

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