Designed to provide broad exposure to the Style Box – Large Cap Growth category of the market, the First Trust Large Cap Growth AlphaDEX ETF (FTC) is a smart beta exchange traded fund launched on 05/08/2007.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.
Fund Sponsor & Index
FTC is managed by First Trust Advisors, and this fund has amassed over $967.73 million, which makes it one of the average sized ETFs in the Style Box – Large Cap Growth. FTC, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Large Cap Growth Index.
The NASDAQ AlphaDEX Large Cap Growth Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Growth Index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.59%.
The fund has a 12-month trailing dividend yield of 0%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 32.20% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, Cheniere Energy, Inc. (LNG) accounts for about 1.31% of the fund’s total assets, followed by Nucor Corporation (NUE) and Freeport-Mcmoran Inc. (FCX).
FTC’s top 10 holdings account for about 10.6% of its total assets under management.
Performance and Risk
The ETF has lost about -17.64% so far this year and it’s up approximately 3.41% in the last one year (as of 03/08/2022). In the past 52-week period, it has traded between $94.69 and $124.15.
The fund has a beta of 1.05 and standard deviation of 25.25% for the trailing three-year period, which makes FTC a medium risk choice in this particular space. With about 188 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Large Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box – Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ) tracks NASDAQ-100 Index. Vanguard Growth ETF has $72.71 billion in assets, Invesco QQQ has $170.84 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
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 – Large 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
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