circumstances
could have a materially negative impact on the value of the Fund’s shares, the
liquidity of an investment, and may result in
increased market volatility. During any such events, the Fund’s shares may trade
at increased premiums or discounts to their net asset value, the bid/ask spread
on the Fund’s shares may widen and the returns on investment may
fluctuate.
NEW
FUND RISK. The Fund is new and
has no performance history or assets as of the date of this prospectus. The Fund
expects to have fewer assets than larger funds. Like other new funds, large
inflows and outflows may impact the Fund’s market exposure, and in turn, the
Fund’s returns for limited periods of time.
NON-DIVERSIFICATION
RISK. As
a “non-diversified” fund, the Fund may hold a smaller number of portfolio
securities than many other funds and may be more sensitive to any single
economic, business, political or regulatory occurrence than a diversified fund.
To the extent the Fund invests in a relatively small number of issuers due to
the high percentage of the Fund’s assets invested in that security, a decline in
the market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of the Fund’s
shares may be more volatile than the values of shares of more diversified
funds.
OPERATIONAL
RISK.
The Fund is subject to risks arising from various operational factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund
relies on third-parties for a range of services, including custody. Any delay or
failure relating to engaging or maintaining such service providers may affect
the Fund’s ability to meet its investment objective. Although the Fund and the
Fund’s investment advisor seek to reduce these operational risks through
controls and procedures, there is no way to completely protect against such
risks.
PREMIUM/DISCOUNT
RISK.
The market price of the Fund’s shares will generally fluctuate in accordance
with changes in the Fund’s net asset value as well as the relative supply of and
demand for shares on the Exchange. First Trust cannot predict whether shares
will trade below, at or above their net asset value because the shares trade on
the Exchange at market prices and not at net asset value. Price differences may
be due, in large part, to the fact that supply and demand forces at work in the
secondary trading market for shares will be closely related, but not identical,
to the same forces influencing the prices of the holdings of the Fund trading
individually or in the aggregate at any point in time. However, given that
shares can only be purchased and redeemed in Creation Units, and only to and
from broker-dealers and large institutional investors that have entered into
participation agreements (unlike shares of closed-end funds, which frequently
trade at appreciable discounts from, and sometimes at premiums to, their net
asset value), First Trust believes that large discounts or premiums to the net
asset value of shares should not be sustained absent disruptions to the creation
and redemption mechanism, extreme market volatility or potential lack of
authorized participants. During stressed market conditions, the market for the
Fund’s shares may become less liquid in response to deteriorating liquidity in
the market for the Fund’s underlying portfolio holdings, which could in turn
lead to differences between the market price of the Fund’s shares and their net
asset value and the bid/ask spread on the Fund’s shares may widen.
REIT
RISK. REITs typically own
and operate income-producing real estate, such as residential or commercial
buildings, or real-estate related assets, including mortgages. As a result,
investments in REITs are subject to the risks associated with investing in real
estate, which may include, but are not limited to: fluctuations in the value of
underlying properties; defaults by borrowers or tenants; market saturation;
changes in general and local operating expenses; and other economic, political
or regulatory occurrences affecting companies in the real estate sector.
Additionally, investing in REITs involves certain other risks related to their
structure and focus, which include, but are not limited to, dependency upon
management skills, limited diversification, the risks of locating and managing
financing for projects, heavy cash flow dependency, possible default by
borrowers, the costs and potential losses of self-liquidation of one or more
holdings, the risk of a possible lack of mortgage funds and associated interest
rate risks, overbuilding, property vacancies, increases in property taxes and
operating expenses, changes in zoning laws, losses due to environmental damages,
changes in neighborhood values and appeal to purchasers, the possibility of
failing to maintain exemptions from registration under the 1940 Act, failure to
satisfy the requirements of the Internal Revenue Code of 1986 for maintaining
REIT status and, in many cases, relatively small market capitalization, which
may result in less market liquidity and greater price volatility for a REIT’s
shares. REITs are also subject to the risk that the real estate market may
experience an economic downturn generally, which may have a material effect on
the real estate in which the REITs invest and their underlying portfolio
securities. The Fund's investment in REITs generally results in the layering of
fees and expenses, such that shareholders will indirectly bear a proportionate
share of the operating expenses of the REITs, in addition to paying the Fund’s
fees and expenses.
SMALLER
COMPANIES RISK. The stock price of
small and/or mid capitalization companies may be more volatile than those of
larger companies and therefore the Fund’s share price may be more volatile than
those of funds that invest a larger percentage