First Trust Capital Funds Ask SEC to Skip Sub-Adviser Votes
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Quick Answer
On October 22, 2026, First Trust Capital Management L.P. and 22 non-traded funds it advises filed a Form 40-APP asking the SEC for an order that would let the adviser hire sub-advisers and change their contracts without a shareholder vote, and let the funds show only total sub-adviser fees. No order has been issued; the application says this relief “has to date not been granted for Unlisted CEFs/BDCs.” The 22 funds held $5.38 billion of net assets at June 30, 2026 (our arithmetic from Form N-PORT), 65.2% of it in the First Trust Alternative Opportunities Fund ($3.51 billion). Two points differ from the headline: each fund must still win a shareholder vote once before it can use the order, and a new sub-adviser can start without a vote only after a tender offer that the fund fully satisfies, announced at least 60 days ahead.
Key Takeaways
- It is an application, not an order. The Form 40-APP (accession 0001104659-26-118140) was filed October 22, 2026 under Section 6(c) of the Investment Company Act and the file number was still blank. The SEC has granted similar relief only to open-end funds (Carillon in 2019, Morgan Stanley Pathway on August 12, 2025, Wedbush on August 5, 2025); the application says none has gone to an unlisted closed-end fund or BDC.
- It covers 22 funds, not 8. Eight are the First Trust Capital funds a reader would expect (Destiny Alternative Fund, Alternative Opportunities, Enhanced Private Credit, Hedged Strategies, Private Assets, Private Credit, Real Assets, Infinity Core Alternative) and 14 are FT Vest Hedged Equity Income and Total Return Income series. The order would also reach any future unlisted fund or BDC the adviser launches.
- A first vote is still required. Condition 1 says each fund must have its operation as a multi-manager fund approved by a majority of its outstanding voting securities, or by its initial sole shareholder before public sale. The application says “certain Funds” have not yet obtained that approval; no proxy for it was on EDGAR for any of the 22 funds on October 23, 2026.
- Holders would get an exit window instead of a ballot. Without a vote, a new sub-adviser can start only after the fund runs a tender or repurchase offer at net asset value, that is not oversubscribed, with notice at least 60 days before it expires. Any change that raises the aggregate advisory fee rate still goes to a vote (Condition 14).
- The fee view shrinks. Today the Alternative Opportunities Fund reports a 0.80% sub-adviser rate for RiverNorth and 0.50% for Palmer Square, and a 2022 proxy gave $243,630 of sub-advisory fees (0.12% of average net assets). The order would let the fund report only aggregate dollars and percentages for the adviser and its wholly-owned sub-advisers, and for affiliated and unaffiliated sub-advisers.
- Votes have cost real money on small funds. The Real Assets Fund (net assets $12.5 million at June 30, 2026) budgeted about $8,100 for a proxy solicitor to approve one sub-adviser swap, 35% of the $23,070 of sub-advisory fees it paid the outgoing manager in its prior fiscal year (our arithmetic).
CSV · 96 rows
First Trust Capital Management exemptive application of October 22, 2026: terms, conditions, past sub-adviser votes and the 22 funds' net assets and fees
96 rows: the application's relief, precedents and conditions, two past sub-adviser proxy votes with their costs, Form N-PORT net assets of all 22 funds at June 30, 2026, and fees and repurchase terms from annual and semi-annual reports. One accession number per row.
What the application asks for
The two requests are separate. The first is an exemption from Section 15(a) of the 1940 Act, which requires shareholders to approve every advisory contract, including a sub-advisory contract. In the application’s words, the applicants “request an order exempting them from Section 15(a) of the 1940 Act to permit the Adviser, subject to the approval of the respective board of trustees” to hire sub-advisers and “materially amend” their agreements. The second is relief from the fee-disclosure items of Form N-2, Schedule 14A and Regulation S-X, so that a fund shows only “the aggregate fees paid to the Adviser and any Wholly-Owned Sub-Advisers” and “the aggregate fees paid to Affiliated and Non-Affiliated Sub-Advisers”, as a dollar amount and a percentage of net assets.
| Item | What the Form 40-APP says | Why it matters to a holder |
|---|---|---|
| Filed | October 22, 2026; file number 812-[ ] blank | Pending. We found no Commission notice or order on October 23, 2026. |
| Applicants | First Trust Capital Management L.P. and 22 funds | Includes 14 FT Vest series that most readers do not connect to the brand. |
| Vote relief | Section 15(a) of the 1940 Act, under Section 6(c) | Shareholders would stop voting on each new sub-adviser or material contract change. |
| Fee disclosure relief | Form N-2 Items 9(1)(b)(3) and 20(1)(c); Schedule 14A Item 22; Regulation S-X 6-07(2) | Individual sub-adviser rates and dollars would no longer be published. |
| Precedent | Carillon (order May 29, 2019); Morgan Stanley Pathway (August 12, 2025); Wedbush (August 5, 2025) | All were for open-end funds that offer daily redemption. |
| Scope | Any existing or future unlisted closed-end fund or BDC advised by the adviser, interval or tender offer fund | The 22 names are not a cap. |
| Board authorization | Resolutions of June 11, 2026 (Enhanced Private Credit: November 3, 2025) | The resolutions also mention Sections 17(a), 17(e), 10(f), 12(d)(3) and Rule 17e-1; the body of the application seeks only the Section 15(a) and disclosure relief (our reading). |
The application argues that a vote is “time-intensive, expensive and slow”. It describes the sub-adviser as the equivalent of a portfolio manager employed by the adviser and says the adviser is “in the better position” to choose one. Whether the SEC agrees is the open question; the order, if granted, would carry conditions that the applicants themselves proposed.
The conditions that protect holders
The applicants propose seven conditions that matter most to a holder. Several were added to the open-end template because these funds do not give daily redemption.
| Condition | What it says | Plain reading |
|---|---|---|
| 1 | Operating as a multi-manager fund must be approved by a majority of outstanding voting securities, or by the initial sole shareholder before the public offering | Each fund still holds one vote before it can use the order. |
| 9 | A new sub-adviser hired without a vote needs a tender or repurchase offer first, not oversubscribed, at NAV | Holders who dislike the change can leave, if the offer is large enough for everyone who asks. |
| 10 | The Sub-Adviser Notice goes out at least 60 days before the offer expires, as a separate document | Two months of warning, in a separate mailing. |
| 11 | The new agreement takes effect no earlier than one business day after the tender pricing date | Tendering holders are priced before the new manager starts. |
| 12 | If the offer is oversubscribed, the fund bears no penalty or fee for abandoning the hire | A heavy rush to exit blocks the change. |
| 13 | The order expires if the SEC adopts a substantially similar rule | The relief is meant to be temporary if a rule follows. |
| 14 | A change that raises the aggregate advisory fee rate goes to a shareholder vote | The vote survives for fee increases. |
The notice has an information-statement side as well: the fund would post a Multi-manager Information Statement on a website for “at least 90 days”. Two weak spots stand out in our reading. First, oversubscription is the test, so a fund with a small quarterly offer (most of these funds offer about 5% of shares per quarter, see below) could see the change blocked by a modest wave of requests, or it could use that fact to avoid a vote when demand to leave is low. Second, the exit window is available only for new hires. The application text we read does not describe a tender requirement when an existing sub-advisory agreement is “materially amended”.
Who is covered, and how big they are
The 22 funds had $5.38 billion of net assets at June 30, 2026 (Form N-PORT, our sum). The eight core funds are $4.49 billion of that and the 14 FT Vest series $0.88 billion.
| Fund | Net assets, Jun 30, 2026 | Management fee | Sub-adviser disclosed in the filings | Repurchase pattern |
|---|---|---|---|---|
| First Trust Alternative Opportunities Fund (CIK 1681717) | $3,505.2M | 0.95% | RiverNorth 0.80%, Palmer Square 0.50% | Quarterly, expected up to 5% |
| First Trust Private Credit Fund | $465.3M | 1.35% | Mount Logan 1.00%, Palmer Square 0.45% from Jul 1, 2025 | Quarterly, no less than 5% |
| Infinity Core Alternative Fund | $171.6M | 1.25% | Infinity Capital Advisors receives 50% of the fee | Generally quarterly; August 2026 offer up to 5% |
| First Trust Private Assets Fund | $107.3M | 0.75% plus incentive fee | None named in the fee note | Tender offers, generally quarterly |
| First Trust Enhanced Private Credit Fund | $85.5M | 1.00% plus incentive fee | None named in the fee note | Tender offers every six months, up to 3.5% |
| Destiny Alternative Fund | $80.9M | Tiered | None named in the fee note | Biannual, not more than 5%; September 2026 offer 5% |
| First Trust Hedged Strategies Fund | $65.6M | 1.05% | None named in the fee note | Quarterly, no less than 5% |
| First Trust Real Assets Fund | $12.5M | 1.35% | Sardis 0.45% from Aug 1, 2025 (Angel Oak 0.50% before) | Quarterly, no less than 5% |
| 14 FT Vest series (Hedged Equity Income A2-A4, B1-B3; Total Return Income A1-A4, B1-B4) | $882.4M together; $13.5M to $135.3M each | 2.65% unitary fee, same for each | Vest Financial LLC, an affiliate, receives 50% of the unitary fee | Tender offers of about 10% of net assets |
Funds with a disclosed sub-adviser hold about $5.04 billion, or 93.7% of the 22-fund total (our arithmetic). That is why the fee-disclosure request matters more than the size of the legal change: the rates in the table above come from the funds’ own reports today, and the order would let them stop printing them.
An example of the FT Vest scale (our arithmetic): a 2.65% unitary fee on $882.4 million is about $23.4 million a year, and the report says the sub-adviser receives 50% of it, before a reduction for the sub-adviser’s share of fund expenses. The filings we read do not say which of the application’s categories (wholly-owned, affiliated or non-affiliated) Vest Financial falls into, so we cannot say how its fee would be reported.
What a vote costs today: two proxy statements
The best evidence of what the exemption saves, and what holders lose, is the two proxy statements these funds have filed for sub-adviser changes.
| Fund | Meeting | What holders voted on | Sub-adviser fee shown to holders | Solicitor cost, paid by the fund |
|---|---|---|---|---|
| First Trust Alternative Opportunities Fund | January 26, 2023 | Adding Palmer Square as sub-adviser | $243,630 for the year to Mar 31, 2022, 0.12% of average net assets; adviser’s net advisory fee $1,287,817 (0.64%) | About $20,000 |
| First Trust Real Assets Fund | July 24, 2025 | Replacing Angel Oak with Sardis | $23,070 for the year to Mar 31, 2025, 0.12% of average net assets; rate 0.50% falling to 0.45% | About $8,100 |
The Real Assets Fund proxy shows the point of the application. The new sub-adviser’s principals had managed the fund while employed by the old one, the fee fell five basis points, and the vote needed “more than 50% of the outstanding shares” or 67% of shares present if over half were present. The fund paid about $8,100 to get a result on a $12.5 million fund; the solicitor bill is 35.1% of the $23,070 sub-advisory fee (our arithmetic). On the Alternative Opportunities Fund the same arithmetic gives 8.2% ($20,000 against $243,630). Neither number is large against a multi-billion-dollar fund, but both are real, and in both the holder saw the sub-adviser’s rate and dollars before voting.
Where our other pages are affected
Our list of interval funds ranks the Alternative Opportunities Fund eighth by size with $3.51 billion at June 30, 2026, which matches the N-PORT figure used here. Readers who hold these funds in an IRA should also read our RMD census, where 19 of the 26 funds that accept RMD tenders in full carry the First Trust or FT Vest name: a tender offer is the exit that Condition 9 relies on. The mechanics of those offers are in what a tender offer is and what an interval fund is.
What a reader can do with this
- If you hold one of the 22 funds: find your fund in the table and check whether its fee note names a sub-adviser. If it does, the rates there are what you will see less of if the order is granted.
- Watch for the vote. Condition 1 means a proxy or consent for each fund should come before any reliance on the order. We found none on EDGAR for any of the 22 funds on October 23, 2026. Read it when it arrives; the fee disclosure will likely be the last time a per-sub-adviser rate is shown in a proxy.
- Watch for the notice. The application gives no date for an order. Look for the Commission’s notice and order under file number 812-[ ] (the number was blank at filing) and for any amendment to the application.
- If you want an exit: a tender window is the only exit these funds offer, and the offers are small (about 5% of shares per quarter for the larger funds). See the repurchase column above and our Q4 2026 deadline calendar.
- Taxes: a sale in a tender offer can have tax consequences; account-specific questions belong with a tax professional.
FAQ
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All figures are from SEC EDGAR filings read on October 23, 2026: the Form 40-APP of October 22, 2026 (accession 0001104659-26-118140); Form N-PORT filings of August 28 and 31, 2026 for the 22 funds; the Form N-CSR filings of June 9, 2026 and Form N-CSRS filings of September 4, 2026; the Schedules TO-I of August 26, September 18 and September 25, 2026; the definitive proxy statements of December 2, 2022 (Alternative Opportunities Fund) and July 11, 2025 (Real Assets Fund); and the EDGAR submissions index of each fund. Sums, shares of totals and cost ratios are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.
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