Back to top

Image: Bigstock

Is First Trust Small Cap Value AlphaDEX ETF (FYT) a Strong ETF Right Now?

Read MoreHide Full Article

Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Value AlphaDEX ETF (FYT - Free Report) provides investors broad exposure to the Style Box - Small Cap Value 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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by First Trust Advisors, and has been able to amass over $205.94 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Value Index.

The NASDAQ AlphaDEX Small Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Value Index.

Cost & Other Expenses

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 cousins, other things remaining the same.

Annual operating expenses for FYT are 0.70%, which makes it one of the most expensive products in the space.

It's 12-month trailing dividend yield comes in at 0.79%.

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.

FYT's heaviest allocation is in the Financials sector, which is about 33.90% of the portfolio. Its Industrials and Real Estate round out the top three.

Taking into account individual holdings, Amc Networks Inc. (class A) (AMCX - Free Report) accounts for about 0.83% of the fund's total assets, followed by Cooper Tire & Rubber Company (CTB - Free Report) and Assured Guaranty Ltd. (AGO - Free Report) .

FYT's top 10 holdings account for about 7.73% of its total assets under management.

Performance and Risk

The ETF has gained about 24.08% so far this year and was up about 95.73% in the last one year (as of 03/10/2021). In the past 52-week period, it has traded between $19.40 and $51.20.

FYT has a beta of 1.61 and standard deviation of 34.99% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.


First Trust Small Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 Value ETF (IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $16.21 billion in assets, Vanguard SmallCap Value ETF has $21.78 billion. IWN has an expense ratio of 0.24% and VBR 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 Value.

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.

Published in