NTRL
1. Summary
- NTRL is an actively managed First Trust ETF that runs a long/short U.S. equity book aimed at beta neutrality (returns that don't depend on the stock market's direction). It picks stocks with fundamental, market, technical and statistical data.
- Its stated normal range is 150% to 250% long and 150% to 250% short. That is 3.0x to 5.0x gross. No measured long, short or gross figure is given in the three documents.
- It gets its long and short exposure "primarily through the use of total return swaps" with unnamed bank counterparties. It does not say it shorts stock directly through a prime broker.
- The fund was the First Trust Merger Arbitrage ETF until June 2026. All cost, turnover and net asset figures in the documents come from that old strategy.
- Most relevant for us: NTRL's stated minimum (150/150) is exactly our target, and it reaches it in a 40 Act ETF with swaps, not direct shorts. But the documents don't name the counterparties, the swap spreads or where collateral sits.
2. Key facts
| Item | Detail | Source |
|---|---|---|
| Name and ticker | First Trust Equity Market Neutral ETF (NTRL). Formerly First Trust Merger Arbitrage ETF. | NTRL-FS, page 1, header and "Fund Facts"; NTRL-PR, page 1, cover |
| Exchange | NYSE Arca | NTRL-FS, page 1, "Fund Facts"; NTRL-PR, page 1, cover |
| CUSIP | 33740J203 | NTRL-FS, page 1, "Fund Facts" |
| Inception date | February 4, 2020 ("2/4/20" and "2/4/2020") | NTRL-FS, page 1, "Fund Facts"; NTRL-PR, page 12, "Average Annual Total Returns" |
| Trust | First Trust Exchange-Traded Fund III, a Massachusetts business trust organized January 9, 2008. The fund is a "non-diversified series." The adviser serves "10 exchange-traded funds consisting of 306 series." The trust carries the adviser's name and no outside adviser appears, so it is First Trust's own trust, not a multi-client series trust (my inference). | NTRL-SAI, page 3, "General Description of the Trust and the Fund"; NTRL-PR, page 24, "Management of the Fund" |
| Fiscal year end | July 31 ("The fiscal year end of the Fund is July 31.") | NTRL-PR, page 13, "Additional Information on the Fund's Investment Objective and Strategies" |
| Net assets and NAV | $39,282 thousand net assets and $20.67 NAV per share at January 31, 2026 (unaudited). This is before the June 2026 strategy change. The fact sheet gives neither figure. | NTRL-PR, page 33, "Financial Highlights" |
| Morningstar category and rating | Not stated | |
| Number of long and short positions | Not stated. The fact sheet shows "Number Of Holdings 9" and lists the top 10 long and top 10 short "Underlying Swap Holdings." What the 9 holdings are is not stated. They are likely the swaps plus cash or short-term holdings (my inference). | NTRL-FS, page 2, "Portfolio Information" and "Top Underlying Swap Holdings (Notional %)" |
| Distribution frequency | Income "declared and paid quarterly." Capital gains "at least annually." | NTRL-PR, page 26, "Dividends, Distributions and Taxes" |
| Creations and redemptions | Cash, at least in part: "The Fund will effect some or all of its creations and redemptions for cash, rather than in-kind." | NTRL-PR, page 4, "Cash Transactions Risk" |
3. Service providers
| Role | Firm | Source |
|---|---|---|
| Adviser | First Trust Advisors L.P. Also the fund's "commodity pool operator and commodity trading advisor." | NTRL-PR, page 24, "Management of the Fund"; NTRL-FS, page 1, "Fund Advisor" |
| Sub-adviser | Not stated for the current strategy. The prospectus refers to the board's approval of "the Investment Sub-Advisory Agreement" in the Form N-CSR for the fiscal year ended July 31, 2025, so a sub-adviser likely ran the old merger arbitrage strategy (my inference). It is not named. | NTRL-PR, page 25, "Management Fee" |
| Portfolio managers | John Gambla, CFA, and Rob A. Guttschow, CFA, Senior Portfolio Managers of First Trust, managing the fund "since 2026." The fact sheet adds FRM and PRM to Mr. Gambla's credentials. | NTRL-PR, page 12, "Management"; NTRL-FS, page 1, "Fund Advisor"; NTRL-SAI, page 21, "Portfolio Managers" |
| Administrator | The Bank of New York Mellon (BNY) | NTRL-PR, page 31, "Fund Service Providers"; NTRL-SAI, page 23, "Administrator and Fund Accountant" |
| Fund accountant | BNY ("accounting agent") | NTRL-PR, page 31; NTRL-SAI, page 23 |
| Custodian | BNY | NTRL-PR, page 31; NTRL-SAI, page 24, "Custodian" |
| Transfer agent | BNY | NTRL-PR, page 31; NTRL-SAI, page 24, "Transfer Agent" |
| Distributor | First Trust Portfolios L.P., an affiliate of the adviser | NTRL-SAI, page 24, "Distributor"; NTRL-PR, page 24 |
| Auditor | Deloitte & Touche LLP | NTRL-SAI, page 37, "Independent Registered Public Accounting Firm"; NTRL-PR, page 33 |
| Prime broker | Not stated | |
| Swap counterparties | Not named. The prospectus refers only to "the bank that is the counterparty to the swap agreement" and to "the Fund's other counterparties." | NTRL-PR, page 9, "Special Tax Risk"; NTRL-PR, page 10, "Valuation Risk" |
| Securities lending agent | Not named. The SAI refers only to "the First Trust Fund's lending agent." | NTRL-SAI, page 10, "Lending of Portfolio Securities" |
Legal counsel: Chapman and Cutler LLP (NTRL-PR, page 31).
4. Strategy
- Objective and benchmark. The objective is "to seek to provide investors with capital appreciation" (NTRL-PR, page 3, "Investment Objective"). It is fundamental and needs a shareholder vote to change (NTRL-PR, page 13). No formal benchmark is named. The prospectus and fact sheet compare returns with the ICE BofA US 3-Month Treasury Bill Index and the S&P 500 (NTRL-PR, page 12; NTRL-FS, page 1).
- Universe. U.S. exchange-listed stocks, including U.S.-listed depositary receipts of non-U.S. issuers, of "various market capitalizations" (NTRL-PR, pages 3 and 4, "Principal Investment Strategies"). At least 80% of net assets goes into derivatives, ETFs or stocks giving that exposure, with derivatives counted "at their gross notional value" (NTRL-PR, page 3). No sector limits are stated beyond the fundamental 25% single-industry limit (NTRL-SAI, page 6, "Investment Objective and Policies").
- How it picks stocks. Both quantitative and fundamental. The process "analyzes fundamental, market-related, technical and statistical attributes of eligible securities" (NTRL-PR, page 4). The fact sheet adds that "Additional proprietary research will be used to tactically manage" the size and mix of the long and short books (NTRL-FS, page 1, "Fund Description").
- Neutrality targets. Beta neutral. The fund "intends to be market-neutral" and "This is also sometimes referred to as beta neutrality" (NTRL-PR, page 4). The fact sheet says the adviser sizes positions "seeking to neutralize broad market beta exposure" (NTRL-FS, page 1). No dollar or sector neutrality target is stated.
- Net exposure. No target is stated. The long and short ranges are set separately, so net dollar exposure could run from minus 100% to plus 100% within them (my arithmetic). On September 30, 2026, the top 10 longs summed to 17.70% and the top 10 shorts to minus 12.95% (my arithmetic, from NTRL-FS, page 2).
- Limits on position size. No numeric limit is stated. The fund is non-diversified (NTRL-PR, page 4). The largest underlying long was Teradyne at 1.99% and the largest short was Hyatt Hotels at minus 1.50%, as of September 30, 2026 (NTRL-FS, page 2). The fact sheet labels these "Notional %" but doesn't say of what base. If the long book is at least 150% and no long exceeds 1.99%, the fund holds at least 76 longs (my arithmetic and inference).
5. Exposure and leverage
- Measured exposure. Not stated. None of the three documents gives long, short, gross or net exposure at a date.
- Stated targets. "The Fund, under normal market conditions, generally seeks to have exposure ranging from approximately 150%-250% to long positions and approximately 150%-250% to short positions" (NTRL-PR, page 4, "Principal Investment Strategies"). "However, at times, the Fund's exposure may be outside of these ranges" (NTRL-PR, page 4). The fact sheet gives the same range (NTRL-FS, page 1, "Fund Description"). Gross is 3.0x to 5.0x of net assets (my arithmetic).
- How it gets exposure above 100%. Through derivatives, mainly total return swaps: "The Fund expects to maintain long and short positions primarily through the use of total return swaps" (NTRL-PR, page 3). A total return swap is a contract where a bank pays the fund the return on a stock or basket in exchange for a financing payment. The prospectus notes "total return swaps may be leveraged" (NTRL-PR, page 10, "Total Return Swap Risk"). The SAI says "Short-selling is considered 'leverage'" (NTRL-SAI, page 9, "Short Sales").
- Borrowing limits. Fundamental policy: the fund "may not borrow money, except as permitted under the 1940 Act" (NTRL-SAI, page 5, "Investment Objective and Policies"). Bank borrowing needs total assets of "at least 300%" of borrowings, so borrowings may not exceed one-third of total assets (NTRL-SAI, page 6). Borrowing is a non-principal risk, and any borrowings "are intended to be temporary" (NTRL-PR, page 23, "Borrowing and Leverage Risk"). No line of credit is named.
6. Shorting, financing and collateral
- How it shorts. Mainly through total return swaps (NTRL-PR, page 3). The fact sheet lists "Short Exposure" under "Top Underlying Swap Holdings" (NTRL-FS, page 2). No split between swaps and other methods is given.
- Permitted only. Direct short sales: the fund "will have a short position where it sells a security it does not own by delivery of a borrowed security" or through an ETF or derivative (NTRL-PR, page 4). Long and short stock positions, ETFs and futures are also allowed: "The Fund may also include long and short positions in U.S. exchange-listed equity securities, including exposure obtained through ETFs and futures" (NTRL-PR, page 3). Hedging may use listed futures, listed options, forwards and swaps (NTRL-PR, page 14, "Hedging-Related Derivatives Instruments"). The documents don't say the fund uses any of these now.
- Who lends the stock and who holds collateral. Not stated. No prime broker is named. Under swaps, the counterparty bank holds the hedge, not the fund (my inference).
- What is posted. Cash and short-term instruments: "These investments are typically maintained to meet collateral and margin requirements, manage daily cash flows, and satisfy the Fund's liquidity needs" (NTRL-PR, page 13, "Cash Equivalents and Short-Term Investments/Temporary Defensive Positions"). Collateral may also flow the other way: "If the Fund holds collateral posted by its counterparty" (NTRL-PR, page 15, "Counterparty Risk"). Whether long stocks are pledged is not stated.
- Short sale proceeds used to buy longs. Not stated.
- Segregated or tri-party account. Not stated. BNY is "generally responsible for the safekeeping of the Fund's assets" (NTRL-SAI, page 24, "Custodian"). The documents don't say whether swap collateral sits at BNY or with the counterparties.
- Securities lending. Permitted "as a non-principal investment strategy," up to "33⅓% of the value of its total assets," at First Trust's choice with notice to the board (NTRL-SAI, page 10, "Lending of Portfolio Securities"). The documents don't say whether NTRL lends.
7. Derivatives and Rule 18f-4
- Derivatives used. Total return swaps are the main tool (NTRL-PR, page 3). OTC and exchange-traded derivatives, futures and ETFs are permitted (NTRL-PR, pages 3 and 14). The prospectus says some total return swaps "are centrally-cleared and are exchange-traded" (NTRL-PR, page 10). Whether NTRL's swaps are bilateral or cleared is not stated. The tax risk refers to "the bank that is the counterparty," which suggests bilateral bank swaps (my inference) (NTRL-PR, page 9).
- Limited derivatives user or full program. Full program: the SAI refers to board oversight of "the Fund's derivatives risk management program" (NTRL-SAI, page 16, "Unitary Board Leadership Structure"). The prospectus says only that derivatives use is "pursuant to Rule 18f-4" and that the required policies depend "upon the Fund's level of exposure to derivative instruments" (NTRL-PR, page 14, "Derivative Instruments"). At 300% or more gross notional, the fund would be far above the limited-user threshold (my inference). No derivatives risk manager is named.
- VaR test and reference portfolio. Not stated. VaR (value at risk) estimates the most a fund could lose over a set period at a set confidence level. Neither document mentions VaR, a relative or absolute test, or a reference portfolio.
- Commodity pool status. NTRL is a commodity pool. It is not relying on the CFTC Rule 4.5 exclusion (my inference): "Due to the Fund's potential use of CFTC Derivatives above the prescribed levels, however, the Fund will be considered a 'commodity pool' under the Commodity Exchange Act" (NTRL-SAI, page 7, "Investment Strategies"). "First Trust has registered as a 'commodity pool operator' with the CFTC" (NTRL-PR, page 14).
8. Costs
| Item | Amount | Source |
|---|---|---|
| Management fee | 0.95%. Unitary: First Trust pays fund expenses except listed exclusions. Breakpoints lower it above $2.5 billion of net assets, down to 0.855% above $10 billion. | NTRL-PR, page 3, "Fees and Expenses of the Fund"; NTRL-PR, page 25, "Management Fee"; NTRL-SAI, page 21 |
| Other expenses | 0.00% | NTRL-PR, page 3 |
| Dividend and interest expense on short sales | No line in the fee table. Excluded from the unitary fee: "interest" and "expenses associated with short sales transactions, if any." Under the old strategy, the financial highlights show total expenses with and without "dividend expense and margin interest expense." | NTRL-PR, page 3; NTRL-PR, page 25; NTRL-PR, page 33, "Financial Highlights" |
| Borrowing costs | Not stated as an amount. Interest is excluded from the unitary fee. | NTRL-PR, page 25 |
| Acquired fund fees | 0.00% | NTRL-PR, page 3 |
| Gross and net expense ratio | 0.95% and 0.95%. No waiver line. | NTRL-PR, page 3; NTRL-FS, page 1, "Fund Facts" |
| Fee waivers or caps | No fee waiver. The fund "will not pay 12b-1 fees any time before November 30, 2026" under a contractual agreement. | NTRL-SAI, page 24, "12b-1 Plan" |
| Stated financing spreads or rates | Not stated | |
| Where financing costs are reported | Not stated for the swap strategy. Swap financing is not shown in the fee table, so it is likely netted inside swap returns (my inference). Under the old strategy, dividend expense and margin interest were reported together in the financial highlights. | NTRL-PR, pages 3 and 33 |
- Who pays what. First Trust pays transfer agency, custody, administration, legal, audit and other services out of the 0.95% fee (NTRL-PR, page 25; NTRL-SAI, page 24). The fund pays interest, taxes, acquired fund fees, brokerage and other trading costs, short sale expenses, any 12b-1 fees and extraordinary expenses (NTRL-PR, page 25).
- Conflict in the exclusion list. The prospectus lists "expenses associated with short sales transactions, if any" as excluded (NTRL-PR, page 25). The SAI's list does not include that item (NTRL-SAI, page 21). Both list interest and trading costs.
- Past costs, old strategy (fiscal years ended July 31).
| Period | Total expenses | Excluding dividend and margin interest expense | Difference (my arithmetic) |
|---|---|---|---|
| Six months to Jan 31, 2026 (annualized) | 1.38% | 1.26% | 0.12% (0.11% without extraordinary expenses) |
| FY2025 | 1.65% | 1.25% | 0.40% |
| FY2024 | 1.70% | 1.25% | 0.45% |
| FY2023 | 1.80% | 1.25% | 0.55% |
| FY2022 | 1.87% | 1.25% | 0.62% |
| FY2021 | 2.23% | 1.25% | 0.98% |
Source: NTRL-PR, page 33, "Financial Highlights." These figures lump short dividends with margin interest and come from the merger arbitrage strategy. They don't describe the cost of the current swap book. The steady 1.25% suggests the old unitary fee was 1.25%, cut to 0.95% with the change (my inference).
- Brokerage commissions. $25,196 (FY2025), $22,769 (FY2024), $71,986 (FY2023) (NTRL-SAI, page 23, "Brokerage Commissions").
- Portfolio turnover. 209% (six months to January 31, 2026), 195% (FY2025), 301% (FY2024), 367% (FY2023), 246% (FY2022), 280% (FY2021) (NTRL-PR, page 33). The fund "may experience higher levels of portfolio turnover in the current fiscal year" after the strategy change (NTRL-PR, page 3, "Portfolio Turnover").
- Unitary fees paid. $383,862 (FY2025), $669,122 (FY2024), $1,046,930 (FY2023) (NTRL-SAI, page 21).
- Gap between expense ratio and management fee. 0.95% minus 0.95% is 0.00% (my arithmetic). The gap is zero because the fee is unitary and the fee table has no line for short or financing costs. Real total cost will be higher once swap financing is counted (my inference).
9. Performance and risk
Fact sheet returns to September 30, 2026 (NTRL-FS, page 1, "Performance Summary (%)"). Periods under one year are cumulative; longer periods are average annualized.
| Period | NAV | Market price | ICE BofA 3-Month T-Bill | S&P 500 |
|---|---|---|---|---|
| 3 months | 4.01% | 3.97% | 0.89% | 2.30% |
| YTD | 4.22% | 4.17% | 2.65% | 12.75% |
| 1 year | 6.65% | 6.60% | 3.65% | 15.74% |
| 3 years | 4.14% | 4.15% | 4.49% | 22.89% |
| 5 years | 3.46% | 3.48% | 3.70% | 13.79% |
| Since inception | 2.34% | 2.33% | 2.86% | 15.19% |
- Strategy mix. Only the 3-month figure (July 1 to September 30, 2026) falls wholly after the change in June 2026 (my arithmetic). Longer periods mostly reflect merger arbitrage. The fact sheet warns that earlier returns "are not necessarily indicative" of the new strategy (NTRL-FS, page 1, footnote 1).
- Calendar-year returns at NAV. 2021: 0.56%. 2022: 3.46%. 2023: 2.56%. 2024: 0.42%. 2025: 6.91% (NTRL-FS, page 1, "Calendar Year Total Returns (%)"; NTRL-PR, page 11, "Annual Total Return").
- Prospectus figures to December 31, 2025. 1 year 6.91%, 5 years 2.76%, since inception 1.93% before taxes (NTRL-PR, page 12, "Average Annual Total Returns"). Best quarter 2.71% (June 30, 2025). Worst quarter minus 1.88% (March 31, 2024). Year to March 31, 2026: 0.92% (NTRL-PR, page 11).
- Risk statistics. None given (no beta, correlation, volatility, Sharpe ratio, drawdown or capture figures).
10. History and structural changes
- Predecessor funds. None stated. The fund has run since February 4, 2020, under the same ticker (NTRL-FS, page 1).
- Reorganizations and 351 conversions. None stated. Searches for "reorganiz," "predecessor" and "351" found only general trust-power language (NTRL-SAI, page 3).
- Strategy and name change. The fund was First Trust Merger Arbitrage ETF. "On June 22, 2026, the Fund changed its name and Principal Investment Strategies" (NTRL-PR, page 11, "Annual Total Return"; also NTRL-SAI, page 3).
- Conflict on the date. The prospectus and SAI give June 22, 2026. The fact sheet says "On June 24, 2026, the fund converted" (NTRL-FS, page 1, footnote 1). The two dates may refer to the effective date and the trading date, but no document says so (my inference).
- Other changes with the strategy change (my inference).
- Portfolio managers: Gambla and Guttschow have served "since 2026" (NTRL-PR, page 12).
- Fee: the old expense ratio excluding short costs was 1.25% (NTRL-PR, page 33); the new unitary fee is 0.95% (NTRL-PR, page 3).
- Sub-adviser: a sub-advisory agreement was in place for FY2025 (NTRL-PR, page 25). None is named now.
- Document dates. The prospectus and SAI are dated June 22, 2026. Their financial data run only to January 31, 2026, before the change. The fiscal year ended July 31, 2026, but no annual report for it was attached. The fact sheet is as of September 30, 2026.
11. Principal risks
Summary list: NTRL-PR, pages 4 to 11, "Principal Risks." Longer descriptions: NTRL-PR, pages 14 to 23, "Risks of Investing in the Fund."
- Authorized Participant Concentration Risk (page 4).
- Cash Transactions Risk (page 4). Flag: creations and redemptions in cash, which fits a swap book that can't be delivered in kind (my inference).
- Commodity Regulatory Risk (page 5). Flag: derivatives. CFTC position limits may force liquidations.
- Counterparty Risk (page 5; also page 15). Flag: counterparties. A counterparty failure "may result in significant financial loss to the Fund."
- Current Market Conditions Risk (page 5).
- Cyber Security Risk (pages 5 and 6).
- Depositary Receipts Risk (page 6).
- Derivatives Risk (page 6). Flag: leverage and counterparties. "Derivative contracts ordinarily have leverage inherent in their terms."
- Equity Securities Risk (page 6).
- ETF Risk (page 6).
- Futures Contracts Risk (pages 6 and 7).
- Index or Model Constituent Risk (page 7).
- Large Capitalization Companies Risk (page 7).
- Leverage Risk (page 7). Flag: leverage. Losses may "exceed the amount originally invested."
- Liquidity Risk (page 7).
- Management Risk (page 7).
- Market Maker Risk (page 7).
- Market Risk (pages 7 and 8).
- Non-Diversification Risk (page 8).
- Non-U.S. Securities Risk (page 8).
- Operational Risk (page 8). Flag: counterparties. Names errors of "counterparties or other third-parties."
- OTC Derivatives Risk (page 8). Flag: counterparties. Risk "will be higher if it only trades with a single or small number of counterparties."
- Portfolio Turnover Risk (page 8).
- Premium/Discount Risk (page 8).
- Short Sales Risk (pages 8 and 9). Flag: shorting. Loss is "theoretically unlimited."
- Significant Exposure Risk (page 9).
- Smaller Companies Risk (page 9).
- Special Tax Risk (page 9). Flag: counterparties. For the RIC diversification test, the fund treats the swap counterparty bank as an issuer.
- Swap RIC Tax Risk (page 9). Flag: swaps. The fund may owe distributions without receiving cash.
- Total Return Swap Risk (page 10). Flag: leverage, counterparties. Swaps "may be leveraged" and carry "credit risk, counterparty risk, liquidity risk and valuation risk."
- Trading Issues Risk (page 10).
- Valuation Risk (page 10). Flag: counterparties. Swap values may depend on each counterparty's own assessment, and "Neither the Fund nor the Advisor may have full transparency into a counterparty's valuation assessments."
- Volatility Risk (pages 10 and 11).
Non-principal risks include Borrowing and Leverage Risk (page 23). No principal risk is named for a prime broker, for borrow recalls, or for a counterparty ending a swap early.
12. Relevance to our fund
- How close is its structure and leverage? Close in target, different in method (my inference).
- Its stated floor of 150% long and 150% short matches our 150/150 exactly, and it is an equity market neutral 40 Act ETF.
- But it gets that exposure through total return swaps, not a physical book with direct shorts.
- It sits in First Trust's own trust, not on Tidal's platform.
fund_context.mdlists NTRL at 3.6x gross on July 31, 2026. None of the three attached documents gives that figure, so it can't be checked here.
- What does it show about 3.0x gross in a 40 Act ETF? (my inference)
- A large sponsor has filed a prospectus that targets 3.0x to 5.0x gross under normal conditions. So 3.0x and above is achievable in an ETF when the leverage sits inside swaps.
- The swap route avoids the Reg T cap of about 2.0x in
fund_context.md, because the fund doesn't borrow stock itself. - It doesn't test Tidal's view that "100-100 is the best you can do," because that view seems to apply to direct shorting.
- It matches the swap path Tidal mentioned (S7), but with a basket of single-stock exposures rather than a custom index.
- NTRL's notional percentages count toward Rule 18f-4. It needs a full derivatives risk program and must pass a VaR test. The documents don't say which test.
- What does it show about financing, collateral, custody and costs? (my inference)
- Custody: BNY holds the fund's assets, and cash equivalents back swap collateral and margin. This avoids the Tidal concern that shorts must be "custodied away" from the main custodian, because there are no borrowed shares to hold. But the documents don't say whether collateral sits in a control account at BNY or moves to each counterparty.
- Transparency: Tidal worried that a single swap hides the holdings (O8). NTRL discloses its top 10 underlying long and short names on the fact sheet, so a swap book need not be opaque.
- Costs: the 0.95% unitary fee excludes interest and short sale expenses. Swap financing has no line in the fee table. Under the formula in
fund_context.md, a swap book costs $150 × L + $150 × S per $100 above the base rate. NTRL's documents give neither L nor S. Its real cost will only show inside swap returns or in the next annual report. - Regulation: using swaps at this scale made NTRL a commodity pool with a CFTC-registered operator. Our fund would likely face the same if it uses swaps above the Rule 4.5 limits.
- Tax: the fund treats each swap counterparty bank as an issuer for the RIC diversification test. Concentrating on one or two counterparties could strain that test.
13. Gaps and open questions
What the documents don't answer, for a 150/150 fund:
- Measured long, short, gross and net exposure at any date after the June 2026 change.
- The names and number of swap counterparties, and whether the swaps are bilateral or cleared.
- Swap financing spreads on the long and short legs, and how they are reset.
- Where collateral sits: at BNY in a control account, or with each counterparty. Whether the fund also holds a physical long or short book.
- Which Rule 18f-4 VaR test the fund uses, the reference portfolio, and who the derivatives risk manager is.
- Net assets and NAV after the change. Actual costs under the swap strategy for the fiscal year ended July 31, 2026.
- Beta and other risk statistics, given the fund's beta-neutral aim.
- What the fact sheet's 9 holdings are, and what base the "Notional %" figures use.
- Whether NTRL lends securities, and through which agent.
Questions to ask:
- To First Trust: Which banks are NTRL's swap counterparties, and what spreads do you pay on the long and short legs?
- To First Trust: Is swap collateral held at BNY under a tri-party or control agreement, or posted to the counterparties?
- To First Trust: What were NTRL's long, short and gross exposures at July 31 and September 30, 2026? Does this match the 3.6x in our own notes?
- To First Trust: Which VaR test and reference index did the board approve for NTRL?
- To First Trust: Was the strategy change effective June 22 or June 24, 2026?
- To Tidal: Will Tidal run a 150/150 book through total return swaps on single-stock baskets, as NTRL does, rather than direct shorts? Which counterparties does Tidal already have ISDA agreements with?
- To Tidal: Would Tidal register as a commodity pool operator for a swap-based fund, or does it already?
Search terms tried for fields left "Not stated":
- Counterparty names and prime broker: prime broker, counterparty, bank names (Goldman, Morgan, BNP, Societe, Barclays, Citi, UBS, Bank of America, Merrill, Jefferies, Wells Fargo, Nomura, Macquarie), ISDA, credit support.
- Margin type: margin, Regulation T, portfolio margin.
- Leverage cost and short dividends: swap, financing rate, financing spread, swap fee, SOFR, fed funds, interest, borrow, line of credit, box spread, reverse repurchase, dividend expense.
- Collateral location: collateral, segregat, earmark, tri-party, initial margin, variation margin.
- VaR test: value at risk, VaR, 18f-4, derivatives risk manager, limited derivatives user.
- Securities lending agent: securities lending, lending agent.
- Net assets, beta and risk data: net assets, Morningstar, beta, ISIN.
- Predecessor: predecessor, reorganiz, 351, Merger Arbitrage, sub-advis.
14. Documents used
| Code | Document | Date | Pages | Pages read | File name |
|---|---|---|---|---|---|
| NTRL-FS | Fact sheet | Data as of September 30, 2026 | 2 | 1 and 2 (all, text and page images) | 4d8a76f6-NTRL_fact_sheet.pdf |
| NTRL-PR | Prospectus, NTRL only. No supplement attached. | June 22, 2026 | 36 | In full: 1 to 14, 24 to 26, 31, 33. Keyword passages only: 15, 18 to 23, 36. All pages searched by keyword. | 5eb7ff87-NTRL_prospectus.pdf |
| NTRL-SAI | Statement of Additional Information, NTRL only. No supplement attached. | June 22, 2026 | 42 | In full: 1 to 3. Keyword passages only: 5 to 10, 13, 15, 16, 21 to 24, 26 to 31, 35, 37, 38, 40. All pages searched by keyword. | 890066fd-NTRL_SAI.pdf |
Page numbering.
- NTRL-FS: neither page carries a printed number.
- NTRL-PR: PDF page = printed page. PDF pages 1 and 2 (cover and contents) carry no number. PDF page 35 is blank and page 36 is the back cover.
- NTRL-SAI: PDF page 1 is the cover and page 2 is the contents (printed "i"). From PDF page 3 to 38, PDF page = printed page + 2. PDF page 39 is printed A-1, and pages 40 to 42 are printed B-1 to B-3.
- No supplement was found. The word "supplement" appears only in general text.
15. Snapshot sources
- Ticker: NTRL-FS, page 1, "Fund Facts" ("Fund Ticker NTRL").
- Fund name: NTRL-FS, page 1, header. Same name on NTRL-PR, page 1, cover.
- As of date: "As of 9/30/26" (NTRL-FS, page 1, header; also page 2).
- Adviser: "First Trust Advisors L.P. is the advisor to the fund" (NTRL-FS, page 1, "Fund Advisor"); NTRL-PR, page 12, "Management."
- Platform: (my inference) the fund is "a series of First Trust Exchange-Traded Fund III" (NTRL-PR, page 1, cover). The adviser serves "10 exchange-traded funds consisting of 306 series" (NTRL-PR, page 24, "Management of the Fund"). No outside adviser appears in the trust's documents.
- Exchange: "Primary Listing NYSE Arca" (NTRL-FS, page 1, "Fund Facts"); NTRL-PR, page 1, cover.
- Inception: "Fund Inception Date 2/4/20" (NTRL-FS, page 1, "Fund Facts").
- Net assets: "Net assets, end of period (in 000's) $39,282" for the six months ended January 31, 2026 (NTRL-PR, page 33, "Financial Highlights"). Rounded to $39.3 million (my arithmetic). This predates the June 2026 strategy change. The fact sheet gives no net assets figure.
- Strategy type: "The Fund seeks an equity market neutral approach" (NTRL-PR, page 3, "Principal Investment Strategies").
- Long %: Not stated. Only the target range of "approximately 150%-250%" is given (NTRL-PR, page 4).
- Short %: Not stated, as above.
- Gross: (my arithmetic) from "approximately 150%-250% to long positions and approximately 150%-250% to short positions" (NTRL-PR, page 4, "Principal Investment Strategies"); NTRL-FS, page 1, "Fund Description." This is a stated normal range, not a measured figure.
- Above 2.0x: even the bottom of the stated range, 150% plus 150%, is 3.0x (my arithmetic).
- Net: no net figure or target is given. The fund targets beta neutrality, not dollar neutrality (NTRL-PR, page 4).
- Short method: "The Fund expects to maintain long and short positions primarily through the use of total return swaps" (NTRL-PR, page 3, "Principal Investment Strategies").
- Prime broker or counterparty: the documents say only "the bank that is the counterparty to the swap agreement" (NTRL-PR, page 9, "Special Tax Risk"). No firm is named.
- Custodian: "The Bank of New York Mellon ... acts as the administrator, accounting agent, custodian and transfer agent for the Fund" (NTRL-PR, page 31, "Fund Service Providers"); NTRL-SAI, page 24, "Custodian."
- Management fee: NTRL-PR, page 3, "Fees and Expenses of the Fund"; unitary per NTRL-PR, page 25, "Management Fee."
- Total expense ratio: "Total Annual Fund Operating Expenses 0.95%" (NTRL-PR, page 3); "Total Expense Ratio 0.95%" (NTRL-FS, page 1, "Fund Facts"). No waiver line.
- Short costs in expense ratio: the unitary fee excludes "interest" and "expenses associated with short sales transactions, if any" (NTRL-PR, page 25, "Management Fee"). The fee table has no line for them (NTRL-PR, page 3).
- 3-month return: 4.01% at NAV, 3 months to September 30, 2026 (NTRL-FS, page 1, "Performance Summary (%)").
- 1-year return: 6.65% at NAV, 1 year to September 30, 2026 (NTRL-FS, page 1, "Performance Summary (%)"). About nine months of this period ran under the old merger arbitrage strategy (my arithmetic).
- Beta: not given in any of the three documents.
- Beta benchmark: not stated, because no beta is given.
- Beta period: not stated, because no beta is given.
- Leverage Method: "The Fund expects to maintain long and short positions primarily through the use of total return swaps" (NTRL-PR, page 3); "Top Underlying Swap Holdings (Notional %)" with long and short exposure (NTRL-FS, page 2). Direct shorts, stock positions, ETFs and futures are permitted only ("The Fund may also include...", NTRL-PR, page 3).
- Leverage cost: the swap strategy's financing cost is not reported in the fee table (NTRL-PR, page 3). The only reported figure is from the old merger arbitrage strategy: total expenses of 1.65% versus 1.25% "excluding dividend expense and margin interest expense," so 0.40% combined for the fiscal year ended July 31, 2025 (my arithmetic) (NTRL-PR, page 33, "Financial Highlights"). It is left out of the snapshot because it describes a different strategy.
- Short dividend expense: not reported separately. Under the old strategy it is combined with margin interest, as above (NTRL-PR, page 33).
- Ranking properties (Rank to Score): from the ranking of the 27 LS peers prepared November 11, 2026, using only the project's fund profiles. Each of the seven criteria scores Yes = 1, Partly = 0.5, No or Not stated = 0. Funds sort first by Portfolio margin (YES, LIKELY, POSSIBLE, UNLIKELY, NO), then by Score, then Tidal funds first, then higher gross exposure (my inference).
- Rank: 15 of 27, as of November 11, 2026.
- Long/short: beta-neutral long and short U.S. equity book, "approximately 150%-250% to long positions and approximately 150%-250% to short positions" (NTRL-PR, page 4).
- Portfolio margin: UNLIKELY. The fund keeps long and short positions "primarily through the use of total return swaps" (NTRL-PR, page 3). Direct short sales are permitted only (NTRL-PR, page 4). No holdings report was attached to confirm this.
- Cross-collateral: Not stated. Cash and short-term instruments are kept "to meet collateral and margin requirements" (NTRL-PR, page 13). Whether long stocks are pledged is not stated.
- Outside Reg T: No. Exposure comes through swaps, not a margin account (NTRL-PR, page 3) (my inference).
- Short costs (includes dividends): Not stated. The swap strategy's financing cost is not in the fee table (NTRL-PR, page 3). The only reported figure, 0.40% for the fiscal year ended July 31, 2025, is from the old merger arbitrage strategy (NTRL-PR, page 33; my arithmetic).
- Over 2.0x: Yes. The stated range of 150% to 250% per side is 3.0x to 5.0x gross (NTRL-PR, page 4; my arithmetic). A stated range, not a measured figure.
- Tidal: No. The fund is a series of First Trust Exchange-Traded Fund III (NTRL-PR, page 1, cover).
- Score: 2 (my arithmetic).