Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the First Trust Small Cap Growth AlphaDEX ETF (
FYC Quick Quote FYC - Free Report) is a passively managed exchange traded fund launched on 04/19/2011.
The fund is sponsored by First Trust Advisors. It has amassed assets over $439.88 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. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.71%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 0.10%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Healthcare sector--about 24% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Nantkwest, Inc. accounts for about 1.09% of total assets, followed by Exp World Holdings, Inc. (
EXPI Quick Quote EXPI - Free Report) and Sleep Number Corporation ( SNBR Quick Quote SNBR - Free Report) .
The top 10 holdings account for about 9.06% 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 15.19% so far this year and it's up approximately 108.73% in the last one year (as of 04/09/2021). In the past 52-week period, it has traded between $33.56 and $75.91.
The ETF has a beta of 1.29 and standard deviation of 30.07% 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 holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FYC is an outstanding option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
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 $12.32 billion in assets, Vanguard SmallCap Growth ETF has $15.39 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%. Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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.