Launched on 04/19/2011, the First Trust Small Cap Growth AlphaDEX ETF (
FYC Quick Quote FYC - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Growth segment of the US equity market.
The fund is sponsored by First Trust Advisors. It has amassed assets over $236.78 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Further, growth stocks have a higher level of volatility associated with them. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.70%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 0.12%.
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.
This ETF has heaviest allocation to the Healthcare sector--about 27% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Endurance International Group Holdings, Inc. accounts for about 0.95% of total assets, followed by Calix, Inc. (
CALX Quick Quote CALX - Free Report) and Sleep Number Corporation ( SNBR Quick Quote SNBR - Free Report) .
The top 10 holdings account for about 8.19% of total assets under management.
Performance and Risk
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.
The ETF has added roughly 1.97% so far this year and is up about 33.49% in the last one year (as of 01/06/2021). In the past 52-week period, it has traded between $27.59 and $63.80.
The ETF has a beta of 1.32 and standard deviation of 29.14% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
First Trust Small Cap Growth AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FYC is a good option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Growth ETF (
IWO Quick Quote IWO - Free Report) and the Vanguard SmallCap Growth ETF ( VBK Quick Quote VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $11.75 billion in assets, Vanguard SmallCap Growth ETF has $14.10 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%. Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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.