Launched on 04/19/2011, the First Trust Small Cap Growth AlphaDEX ETF (FYC) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FYC has been able to amass assets over $393.13 million, making it one of the average sized ETFs in the Style Box - Small Cap Growth. FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses.
The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.70%.
It has a 12-month trailing dividend yield of 0.72%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FYC, it has heaviest allocation in the Healthcare sector --about 20.50% of the portfolio --while Industrials and Information Technology round out the top three.
Looking at individual holdings, Summit Therapeutics Inc. (SMMT) accounts for about 1.19% of total assets, followed by Adma Biologics, Inc. (ADMA) and Zeta Global Holdings Corp. (class A) (ZETA).
Its top 10 holdings account for approximately 8.9% of FYC's total assets under management.
Performance and Risk
The ETF has added roughly 25.67% and was up about 39.39% so far this year and in the past one year (as of 11/18/2024), respectively. FYC has traded between $56.59 and $83.32 during this last 52-week period.
The ETF has a beta of 1.18 and standard deviation of 24.12% for the trailing three-year period, making it a high risk choice in the space. With about 266 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Growth ETF (IWO) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $12.57 billion in assets, Vanguard Small-Cap Growth ETF has $18.98 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Growth.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free >>First Trust Small Cap Growth AlphaDEX ETF (FYC): ETF Research Reports
ADMA Biologics Inc (ADMA) : Free Stock Analysis Report
iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
Summit Therapeutics PLC (SMMT) : Free Stock Analysis Report
Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports
Zeta Global Holdings Corp. (ZETA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
