Fund Evaluator:

First Trust Merger Arbitrage Cl I Overview

First Trust Merger Arbitrage Cl I (VARBX) is an actively managed Alternative Event Driven fund. First Trust launched the fund in 2015.

The investment seeks returns that are largely uncorrelated with the returns of the general stock market, and capital appreciation. Under normal market conditions, the fund's adviser intends to invest in equity securities (publicly-traded common stock and preferred stock) and derivatives thereof of companies that are involved in a significant corporate event, such as a merger or acquisition. Investments in companies undergoing a merger or acquisition have both risk and return characteristics that are different from the risks of investing in the general stock market. It may invest in equity securities of any market capitalization.

About First Trust Merger Arbitrage Cl I (VARBX)

There are 2 members of the management team with an average tenure of 5.67 years: Daniel Lancz (2015), Peter Paganessi (2026). Management tenure is more important for actively managed funds than passive index funds.

The fund has 2 primary benchmarks: S&P 500 (TR) (1970) index with a weighting of 100% and Bloomberg US Agg Bond TR USD index with a weighting of 100%. First Trust Merger Arbitrage Cl I has 207 securities in its portfolio. The top 10 holdings constitute 44.1% of the fund’s assets. The fund meets the SEC requirement of being classified as a diversified fund. The fund is not considered to have an ESG focus with its investment selection and management.

First Trust Merger Arbitrage Cl I is part of the Alternative Strategies global asset class and is within the Alternative fund group. First Trust Merger Arbitrage Cl I has 1.6% of its portfolio invested in foreign issues. The overall assets allocated to domestic stock is 92.9%. There is 1.6% allocated to foreign stock, and 0.0% is allocated to preferred stocks. The bond allocation as a percentage of total assets is 0.0% (0.0% domestic bond, 0.0% foreign bond and 0.0% convertible bond). First Trust Merger Arbitrage Cl I has 0.7% of the portfolio in cash.

Assets Under Management

The fund has $1 billion in total assets, which is above the $329 million average for the Event Driven category. Normally, lower assets under management translates to higher average expense ratios, and greater total assets are desired. However, for some investment categories, such as small-cap investing, it may be difficult for the manager to fully employ the desired active strategy if assets grow too large or too quickly.

VARBX Performance and Fees

The expense ratio measures how much of a fund’s assets are used for administrative expenses and operating expenses, including adviser fees and fees for the transfer agent and custodial services. The First Trust Merger Arbitrage Cl I expense ratio is high compared to funds in the Event Driven category. First Trust Merger Arbitrage Cl I has an expense ratio of 1.75%, which is 9% lower than its category average, making the fund expense ratio grade a C. While it is difficult to predict returns, it is known that high annual expense ratios reduce your rate of return, and excessive fees are difficult to overcome. Active management normally comes with higher expense ratios than passive index management. Certain investment categories such as small company and foreign also normally have higher expense ratios. It is best to compare fund expense ratios against the category averages for meaningful assessments.

High portfolio turnover can translate to higher expenses and lower aftertax returns. First Trust Merger Arbitrage Cl I has a portfolio turnover rate of 293%, indicating that holds its assets around 0.0 years. By way of comparison, the average portfolio turnover is 218% for the Event Driven category.

Recently, in the month of July 2026, First Trust Merger Arbitrage Cl I returned 0.5%, which earned it a grade of A, as the Event Driven category had an average return of 0.0%. The letter grades of A, B, C, D and F are based upon relative rankings within the investment category. A grade of A, for example, would indicate that the return is in the highest 20% for that time period compared to all funds in that category.

First Trust Merger Arbitrage Cl I has a trailing yield of 3.41%, which is above the 2.23% category average. The fund normally distributes its income annually and its capital gains annually.

It’s natural to seek the best-performing investments, but you must consider the relationship between risk and return and the impact of costs and taxes on your realized returns.

First Trust Merger Arbitrage Cl I Grades

Year to date, the fund has returned 2.5%, 0.1 percentage points better than the category, which translates into a grade of B. The fund has returned 4.7% over the past year (grade of C), 5.4% over the past three years (grade of D) and 4.2% per year over the past five years (grade of B) and 4.0% per year over the past 10 years (grade of C).

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