S T R AT E G I C R I S K M O D E L P O R T F O L I O S

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1 S T R AT E G I C R I S K M O D E L P O R T F O L I O S Q A L L O C AT I O N S MODELS OVERVIEW The First Trust Strategic Risk Model Portfolios are five model portfolios created by the First Trust Advisors Investment Committee which consist of First Trust ETFs, along with other ETFs representing various asset classes to complete the allocations. These models are designed to provide financial advisors with a foundation on which to potentially build scalable asset allocation solutions for their clients. ASSET ALLOCATION VIEWS AND RATIONALE EQUITY ALLOCATION Macro Positioning Favor U.S. Equities At the macro level, we continue to expect robust U.S. economic growth driven by the U.S. consumer, as the tightening labor market buttresses wage growth. Additionally, we believe improvement in business sentiment, and tax policy measures encouraging investment, such as the allowance of accelerated depreciation, should lead to greater willingness on the part of firms to increase capital spending in Consequently, we continue to favor U.S. equities, although internationally, we hold a preference for European equities. Style Positioning Sector Positioning International Positioning Favor Small and Mid-Cap U.S. Equities Favor Information Technology and Financial Services vs. Other Sectors Favor European Equities Small and mid-cap equities still look attractively valued to us relative to large-cap equities and should benefit from increased confidence in the U.S. economy over time, as investors may rotate out of more defensive holdings. Additionally, we are reducing our weighting in core large-cap value in some of the models in order to increase our more focused satellite position in the banking industry. Information technology is a pro-cyclical sector trading at what we still believe is a reasonable level, and that we expect to benefit from broad economic growth, especially increased capital spending on the part of firms. Within financial services, the potential for higher interest rates and less regulation may increase estimates of banking industry profitability. Consequently, we are increasing our weighting to the industry in three of the models this quarter. We believe the European economy will continue to steadily improve in 2018, as a recovering labor market may drive consumption growth, while firming business confidence, improved access to commercial credit, and healthy corporate profits could drive robust investment growth. In addition, European equities still appear reasonably valued, in our view. Consequently, we continue to favor European markets internationally. ALTERNATIVES ALLOCATION Strategy Positioning Favor Absolute Return Strategies Absolute return strategies, such as long/short equities and long/short commodities, currently provide the potential for returns which are less correlated to traditional asset classes such as stocks and bonds, in our opinion. The low correlations to traditional asset classes help improve a model s overall diversification profile, potentially providing lower overall portfolio risk and an improved drawdown profile. For this quarter, we are initiating a position in the First Trust Global Tactical Commodity Strategy Fund in four of the models in order to better position the models for higher inflation, which we anticipate over the course of This information is as of 3/29/18, is subject to change, and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

2 S T R AT E G I C R I S K M O D E L P O R T F O L I O S ASSET ALLOCATION VIEWS AND RATIONALE CONTINUED FIXED INCOME ALLOCATION Duration Positioning Sector Positioning Favor Short Duration vs. Broad Fixed Income Market Treasury Inflation Protected Securities (TIPS) Investment Grade U.S. Corporate Bonds Senior Loans Emerging Market Bonds The Federal Reserve continued its path toward normalizing short-term interest rates in March, as continued labor market strength and an improved global economic outlook bolstered the Federal Open Market Committees view that inflation will reach target levels over the medium term. We believe inflationary pressures will indeed accelerate as the U.S. approaches full employment. We also believe economic growth has the potential to be surprisingly strong given our expectation for robust consumption growth, driven by the strong labor market, and the outlook for increasing business investment in the wake of tax reform. In our view, TIPS are currently valued at levels that still do not fully reflect the possibility of accelerating future inflation arising from the ongoing tightening in U.S. labor markets. We therefore favor inflation-linked treasuries vs. nominal treasuries compared to our fixed income benchmark, although we are reducing our position in the TIPS fund this quarter. We believe investment grade U.S. corporate bonds benefit from a decent yield, while the improving U.S. economy has kept current levels of defaulted bonds at low levels in comparison to history. Tightening credit spreads have led us to reduce our weighting to investment grade U.S. corporate bonds in a few of the models, however. In our opinion, senior loans currently offer an attractive yield, with less credit risk exposure than high yield bonds. Loans are also relatively protected from the risk of potentially rising interest rates due to their short duration and floating rate structure. We continue to believe emerging market bonds will benefit from improving global macroeconomic growth, and emerging market bond valuation levels remain attractive. Additionally, in our view, longer term fundamentals are favorable due to healthier demographics and higher growth rates relative to developed markets. This information is as of 3/29/18, is subject to change, and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

3 M O D E L A L L O C AT I O N S A S O F 3 / 2 9 / 1 8 CAPITAL PRESERVATION CONSERVATIVE BALANCED MODERATE AGGRESSIVE EQUITY ALLOCATION 17.0% 35.0% 50.0% 70.0% 85.0% DOMESTIC CORE First Trust Large Cap Growth AlphaDEX Fund FTC 3.0% 6.5% 8.5% 12.0% 14.5% First Trust Large Cap Value AlphaDEX Fund FTA 3.0% 6.5% 7.5% 10.0% 12.5% First Trust US Equity Opportunities ETF FPX 1.0% 2.5% 2.0% 3.5% 4.0% First Trust Mid Cap Core AlphaDEX Fund FNX 1.5% 2.5% 3.0% 4.0% 5.0% First Trust Small Cap Core AlphaDEX Fund FYX 1.5% 2.5% 3.0% 4.0% 5.0% INTERNATIONAL CORE First Trust Europe AlphaDEX Fund FEP 3.5% 6.0% 8.5% 11.0% 13.0% First Trust Japan AlphaDEX Fund FJP 2.5% 4.0% 5.0% 5.5% 6.5% First Trust Emerging Markets AlphaDEX Fund FEM 2.0% 3.0% SATELLITE First Trust Technology AlphaDEX Fund FXL 1.0% 4.5% 6.0% 5.0% 6.0% First Trust Nasdaq Bank ETF FTXO 6.5% 6.0% 7.0% First Trust Health Care AlphaDEX Fund FXH 3.5% 4.0% First Trust Energy AlphaDEX Fund FXN 1.5% 2.0% First Trust Dow Jones Internet Index Fund FDN 2.0% 2.5% ALTERNATIVES ALLOCATION 8.0% 10.0% 12.0% 10.0% 5.0% First Trust Global Tactical Commodity Strategy Fund FTGC 2.0% 2.0% 2.5% 2.0% First Trust Alternative Absolute Return Strategy ETF FAAR 4.0% 4.0% 4.5% 4.0% 3.0% First Trust Long/Short Equity ETF FTLS 2.0% 2.0% 2.5% 2.0% 2.0% First Trust Hedged BuyWrite Income ETF FTLB 2.0% 2.5% 2.0% FIXED INCOME ALLOCATION 52.0% 43.5% 32.5% 20.0% 10.0% U.S. TREASURY ishares 7-10 Year Treasury Bond ETF IEF 5.5% 2.0% SPDR Portfolio Long Term Treasury ETF SPTL 2.0% 1.5% 1.0% ishares TIPS Bond ETF TIP 6.0% 5.0% 4.0% U.S. MORTGAGE-BACKED First Trust Low Duration Opportunities ETF LMBS 21.0% 17.5% 12.5% 6.5% 3.5% U.S. CORPORATE INVESTMENT GRADE ishares iboxx $ Investment Grade Corporate Bond ETF LQD 15.0% 12.5% 9.5% 4.0% 2.0% U.S. CORPORATE HIGH YIELD First Trust Senior Loan Fund FTSL 5.0% 4.0% 3.0% 2.0% 1.0% INTERNATIONAL First Trust Emerging Markets Local Currency Bond ETF FEMB 3.0% 3.0% 2.5% 2.0% 1.5% SHORT MATURITY ALLOCATION 23.0% 11.5% 5.5% First Trust Enhanced Short Maturity ETF FTSM 23.0% 11.5% 5.5% This information is not personalized investment advice, research or an investment recommendation from any First Trust entity regarding (i) the funds that make up the model portfolios, (ii) the use or suitability of the model portfolios, or (iii) any security in particular, and is intended for use only by a third party financial advisor, with other information, as a resource to help build a portfolio or as an input in the development of investment advice for its own clients. Financial advisors are responsible for making their own independent judgment as to how to use this information. Only an investor and their financial advisor know enough about their circumstances to make an investment decision. First Trust does not have investment discretion over, nor does it place trade orders for, any non-first Trust portfolios or accounts derived from this information. There is no guarantee that any investment strategy illustrated will be successful or achieve any particular result. Investing involves risk, including possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. This information is subject to change and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

4 A L L O C AT I O N C H A N G E S A S O F 3 / 2 9 / 1 8 CAPITAL PRESERVATION CONSERVATIVE BALANCED MODERATE AGGRESSIVE EQUITY ALLOCATION DOMESTIC CORE First Trust Large Cap Growth AlphaDEX Fund FTC First Trust Large Cap Value AlphaDEX Fund FTA -1.0% -2.0% -2.0% First Trust US Equity Opportunities ETF FPX First Trust Mid Cap Core AlphaDEX Fund FNX First Trust Small Cap Core AlphaDEX Fund FYX INTERNATIONAL CORE First Trust Europe AlphaDEX Fund FEP First Trust Japan AlphaDEX Fund FJP First Trust Emerging Markets AlphaDEX Fund FEM SATELLITE First Trust Technology AlphaDEX Fund FXL First Trust Nasdaq Bank ETF FTXO +1.0% +2.0% +2.0% First Trust Health Care AlphaDEX Fund FXH First Trust Energy AlphaDEX Fund FXN First Trust Dow Jones Internet Index Fund FDN ALTERNATIVES ALLOCATION First Trust Morningstar Managed Futures Strategy Fund FMF -2.0% -2.0% -2.5% -2.0% First Trust Global Tactical Commodity Strategy Fund FTGC +2.0% +2.0% +2.5% +2.0% First Trust Alternative Absolute Return Strategy ETF FAAR First Trust Long/Short Equity ETF FTLS First Trust Hedged BuyWrite Income ETF FTLB FIXED INCOME ALLOCATION -4.0% -3.0% -3.0% U.S. TREASURY ishares 7-10 Year Treasury Bond ETF IEF SPDR Portfolio Long Term Treasury ETF SPTL ishares TIPS Bond ETF TIP -3.0% -2.5% -1.5% U.S. MORTGAGE-BACKED First Trust Low Duration Opportunities ETF LMBS +1.5% +2.0% +1.5% U.S. CORPORATE INVESTMENT GRADE ishares Intermediate Credit Bond ETF CIU -5.5% -4.5% -4.0% ishares iboxx $ Investment Grade Corporate Bond ETF LQD +3.0% +2.5% +1.0% U.S. CORPORATE HIGH YIELD First Trust Senior Loan Fund FTSL INTERNATIONAL First Trust Emerging Markets Local Currency Bond ETF FEMB -0.5% SHORT MATURITY ALLOCATION +4.0% +3.0% +3.0% First Trust Enhanced Short Maturity ETF FTSM +4.0% +3.0% +3.0% This information is not personalized investment advice, research or an investment recommendation from any First Trust entity regarding (i) the funds that make up the model portfolios, (ii) the use or suitability of the model portfolios, or (iii) any security in particular, and is intended for use only by a third party financial advisor, with other information, as a resource to help build a portfolio or as an input in the development of investment advice for its own clients. Financial advisors are responsible for making their own independent judgment as to how to use this information. Only an investor and their financial advisor know enough about their circumstances to make an investment decision. First Trust does not have investment discretion over, nor does it place trade orders for, any non-first Trust portfolios or accounts derived from this information. There is no guarantee that any investment strategy illustrated will be successful or achieve any particular result. Investing involves risk, including possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. This information is subject to change and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

5 You should consider a fund s investment objectives, risks, and charges and expenses carefully before investing. Contact First Trust Portfolios L.P. at or visit to obtain a prospectus or summary prospectus which contains this and other information about a First Trust fund. The prospectus or summary prospectus should be read carefully before investing. FUND RISK CONSIDERATIONS An index fund s return may not match the return of the applicable index. Securities held by an index fund will generally not be bought or sold in response to market fluctuations. Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Investors who sell fund shares may receive less than the share s net asset value. Shares may be sold throughout the day on the exchange through any brokerage account. However, unlike mutual funds, shares may only be redeemed directly from the fund by authorized participants, in very large creation/redemption units. If a fund s authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a discount to the fund s net asset value and possibly face delisting. A fund s shares will change in value, and you could lose money by investing in a fund. One of the principal risks of investing in a fund is market risk. Market risk is the risk that a particular security owned by a fund, fund shares or securities in general may fall in value. There can be no assurance that a fund s investment objective will be achieved. A fund may invest in securities issued by companies concentrated in a particular industry or sector which involves additional risks including limited diversification. An investment in a fund concentrated in a single country or region may be subject to greater risks of adverse events and may experience greater volatility than a fund that is more broadly diversified geographically. A fund may invest in small capitalization and mid capitalization companies. Such companies may experience greater price volatility than larger, more established companies. An investment in a fund containing securities of non-u.s. issuers is 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. A fund may invest in depositary receipts which may be less liquid than the underlying shares in their primary trading market. Because a fund s NAV is determined on the basis of U.S. dollars, if a fund invests in non-u.s. securities, you may lose money if the local currency of a non-u.s. market depreciates against the U.S. dollar. Investments in sovereign bonds involve special risks because the governmental authority that controls the repayment of the debt may be unwilling or unable to repay the principal and/or interest when due. Certain securities held by the funds are subject to credit risk, call risk, income risk, interest rate risk, prepayment risk and extension risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and that the value of a security may decline as a result. Credit risk is heightened for floating-rate loans and high-yield securities, because companies that issue loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy. Call risk is the risk that if an issuer calls higher-yielding debt instruments held by a fund, performance could be adversely impacted. Income risk is the risk that income from a fund s fixed-income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of the fixed-income securities in a fund will decline because of rising market interest rates. Prepayment risk is the risk that during periods of falling interest rates, an issuer may exercise its right to pay principal on an obligation earlier than expected. This may result in a decline in a fund s income. Extension risk is the risk that the average life of a mortgage-related security may extend if the rate of prepayments decreases, which increases interest rate exposure. Mortgage-related securities, including mortgage-backed securities, are more susceptible to adverse economic, political or regulatory events that affect the value of real estate. Senior floating rate loans are usually rated below investment grade but may also be unrated. As a result, the risks associated with these loans are similar to the risks of high yield fixed income instruments. High yield securities, or junk bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, may be highly speculative. The market for high yield securities is smaller and less liquid than that for investment grade securities. Illiquid securities involve the risk that the securities will not be able to be sold at the time desired by the fund or at prices approximately the value at which the fund is carrying the securities on its books. Certain of the fixed-income securities in a fund may not have the benefit of covenants which could reduce the ability of the issuer to meet its payment obligations and might result in increased credit risk. If a counterparty defaults on its payment obligations, a fund will lose money and the value of fund shares may decrease. A fund s investment in repurchase agreements may be subject to market and credit risk with respect to the collateral securing the agreements. Securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government. The stocks of companies that have recently conducted an initial public offering have exhibited above-average price appreciation in connection with the initial public offering prior to inclusion in a fund, which may not continue, and these investments may be subject to additional risks, price volatility and speculative trading. The use of futures, options and other derivatives 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. These risks are heightened when a fund s portfolio managers use derivatives to enhance a fund s returns or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by a fund. The trading prices of commodities futures, fixed income securities and other instruments fluctuate in response to a variety of factors. The value of commodities and commodity-linked instruments typically is based upon the price movements of a physical commodity or an economic variable linked to such price movements. The prices of futures, commodities and commodities-linked instruments may fluctuate quickly and dramatically and may not correlate to price movements in other asset classes. FTGC and FAAR do not invest directly in futures instruments. Rather, each fund invests in a wholly-owned subsidiary, which has the same investment objective as the funds, but unlike the funds, it may invest without limitation in futures instruments. The subsidiary is not registered under the 1940 Act and is not subject to all the investor protections of the 1940 Act. Thus, the funds, as an investor in the subsidiary, will not have all the protections offered to investors in registered investment companies. The funds, through their subsidiary, will engage in trading on commodity markets outside the U.S. Trading on such markets is not regulated by any U.S. government agency and may involve certain risks not applicable to trading on U.S. exchanges. Commodity futures contracts traded on non-u.s. exchanges or with non-u.s. counterparties present risks because they may not be subject to the same degree of regulation as their U.S. counterparts. The failure or bankruptcy of a fund s and the subsidiary s clearing broker could result in a substantial loss of fund assets. A fund may be subject to gap risk, which is the risk that a commodity price will change from one level to another with no trading in between. A fund may be subject to regulatory risk, which may result in commodity contract positions requiring liquidation at disadvantageous times or prices. FTGC and FAAR may be subject to the forces of whipsaw markets (as opposed to choppy or stable markets), in which significant price movements develop but then repeatedly reverse, which could cause substantial losses. Alternative investments may employ complex strategies, have unique investment and risk characteristics that may not be suitable for all investors. Short selling creates special risks which could result in increased volatility of returns. In times of unusual or adverse market, economic, regulatory or political conditions, a fund may not be able, fully or partially, to implement its short selling strategy. Certain funds have fewer assets than larger funds, and like other relatively small funds, large inflows and outflows may impact the funds market exposure for limited periods of time. A fund may effect a portion of creations and redemptions for cash, rather than in-kind securities. As a result, a fund may be less tax-efficient. A fund may invest in the shares of other investment companies, which involves additional expenses that would not be present in a direct investment in the underlying funds. In addition, a fund s investment performance and risks may be related to the investment performance and risks of the underlying funds. Certain funds are classified as non-diversified and may invest a relatively high percentage of their assets in a limited number of issuers. As a result, the funds 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. Actively managed funds are subject to management risk because the advisor or sub-advisor will apply investment techniques and risk analyses that may not have the desired result. First Trust Advisors L.P. is registered as a commodity pool operator and commodity trading advisor and is also a member of the National Futures Association. First Trust Advisors L.P. is the adviser to the funds. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the funds distributor. Please visit for the holdings of each First Trust fund and to read a full description of each fund s specific risks before investing. AlphaDEX is a registered trademark of First Trust Portfolios L.P. First Trust Portfolios L.P. has obtained a patent for the AlphaDEX stock selection methodology from the United States Patent and Trademark Office. The Dow Jones Internet Composite Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by First Trust. Dow Jones and Dow Jones Internet Composite Index are trademarks of Dow Jones Trademark Holdings LLC ( Dow Jones ) and have been licensed to SPDJI and have been sublicensed for use for certain purposes by First Trust on behalf of the Fund. The First Trust Dow Jones Internet Index Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones or their respective affiliates and none of them makes any representation regarding the advisability of investing in such product. Morningstar is a registered trademark of Morningstar, Inc. and has been licensed for use by First Trust Advisors L.P. The First Trust Morningstar Managed Futures Strategy Fund is not sponsored, endorsed, issued, sold or promoted by Morningstar, Inc., nor does this company make any representation regarding the advisability of investing in the fund. Nasdaq and Nasdaq US Smart Banks Index are registered trademarks and service marks of Nasdaq, Inc. (which with its affiliates is referred to as the Corporations ) and are licensed for use by First Trust Advisors L.P. The fund has not been passed on by the Corporations as to its legality or suitability. The fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. A patent with respect to the IPOX index methodology has been issued (U.S. Pat. No. 7,698,197). IPOX is a registered international trademark of IPOX Schuster LLC ( First Trust Portfolios L.P. First Trust Advisors L.P.