Two First Trust Hedged Equity Funds Chase 15% Income at up to 3.65% Annual Cost

Investors buy in only at the start of a two-year period, and the hedge that justifies the structure pays off only for those who stay to the end.

August 19, 2026

First Trust Capital Management and Vest Financial are bringing their 15 percent income target to the registered market. On August 18, the two firms registered share offerings for a pair of closed-end funds, FT Vest Total Return Income Fund: Series A3 and Series A4, each built around a two-year hedged equity strategy that aims to pay investors 15.0 percent of net asset value annually while a long-dated put option sits underneath the portfolio.

Both funds are already operating. Series A3 began investing in October 2024 and Series A4 in January 2025, and both were organized as Delaware statutory trusts in July 2024. What is new is the Securities Act registration: each cover page carries a blank Securities Act file number alongside a 1940 Act registration already in place, and each registers shares for offering on a delayed or continuous basis. Series A3 expects to close subscriptions in October 2026 and Series A4 in January 2027, dates that line up with the end of each fund’s first two-year term.

That timing is the structural heart of the product. Shares are sold only once every two years, generally on a Wednesday, at the beginning of what the funds call a Designated Period. At the end of each period the fund resets with the same hedge, and the adviser does not expect the income target to change. An investor who misses the window waits two years for the next one.

How the 15 percent is manufactured

Each fund holds a basket of roughly 100 constituents of the S&P 500, rebalanced by Vest to limit tracking error against the index. Against that basket it buys a single long-dated put on the index itself, struck at the index closing level on the first day of the Designated Period and held to expiration. The put cannot be exercised mid-period and settles for cash at the end; Vest may use FLEX options to build it.

Income comes from two places: dividends on the underlying stocks and premiums from selling short-dated calls. Each week the funds measure dividend income against the sum of the target distribution, reserves and expenses, then write calls to close the gap. Those calls have terms of under 30 days, are typically struck at the money, and are written on a notional amount below the full value of each position, never above 100 percent of it. That is a partial overwrite rather than a full covered-call program, leaving some upside intact on the un-overwritten portion, and the funds state plainly that they will forgo capital appreciation in pursuit of income.

The candor extends to how the distribution gets paid. Each fund intends to distribute monthly at a 15 percent annual rate on net asset value regardless of what the portfolio earns. When available cash falls short, the filings say, assets will be sold to fund the payment, potentially generating additional taxable income and forcing sales at inopportune moments. Any shortfall is a return of capital, which the funds acknowledge shrinks the invested base and lifts the expense ratio over time. The distribution composition disclosed in the Section 19(a) notices, not the 15 percent rate itself, is where the economics will show up.

The protection is bounded in ways worth naming:

• The hedge references the index while the portfolio holds only about 100 of its members, so correlation is imperfect by construction.
• The call writing itself pushes fund performance away from the basket the put is meant to protect.
• The funds disclaim any specific level of protection.
• The put is designed to work only at expiration, so a shareholder who exits early gets the strategy without its floor.

Cost and liquidity

The fee load sits at the upper end of what registered vehicles carry. Both funds pay a 2.65 percent unitary management fee on month-end net assets, out of which First Trust Capital Management covers substantially all operating expenses other than offering and organizational costs, interest, taxes, transaction costs, borrowing costs, 12b-1 fees and extraordinary items. Vest receives half the monthly unitary fee, reduced by its agreement to absorb half of those same excluded expenses. Total annual expenses come to 3.65 percent for Class A and 2.90 percent for Class I.

Class A also carries an initial sales charge of up to 2.00 percent, and the filings note that an investor paying the full load needs a 2.04 percent return simply to break even on it. Rockefeller Financial is the only institution named as receiving a waiver of that charge. Minimums run $25,000 for either class, initial and additional, subject to waiver at the funds’ discretion.

Liquidity is deliberately thin. Neither fund will list, neither expects a secondary market, and shareholders have no redemption right. The board intends to conduct tender offers at least semi-annually at net asset value, ordinarily capped at 5 percent of shares outstanding with pro rata treatment if oversubscribed; the offer coinciding with the end of a Designated Period may run to 100 percent of shares. Every one of those offers is discretionary. The funds may also borrow up to 33 1/3 percent of total assets.

Scale and platform

First Trust Capital Management managed approximately $14.7 billion as of June 30, and Vest approximately $58.8 billion. The relationship between them is closer than a typical sub-advisory arrangement: Vest is a subsidiary of Vest Group, and First Trust Capital Partners, an affiliate of the adviser, is the largest single holder of Vest Group’s voting shares. First Trust Portfolios is expected to distribute the shares, making adviser, sub-adviser and distributor all affiliated.

The two funds are part of a substantial series program. As of March 31, the First Trust fund complex counted 33 portfolios, among them eight Total Return Income series and six FT Vest Hedged Equity Income series. The staggering visible in these two filings, with subscription windows three months apart, gives an advisor whose clients arrive at different times a way into the same strategy without waiting out a full two-year term.

Several items remain unfinished. Both prospectuses leave the financial highlights tables and the interim statements through June 30, 2026 to be filed by amendment, and neither names an independent auditor. The distributor disclosure sits in brackets. On operating scale, the disclosed advisory fees offer a partial read: Series A3 paid $569,371 in unitary fees for 2025, and Series A4 $212,828 for its stub year.