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 $287.63 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.
Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Also, growth stocks are a type of equity that carries more risk compared to others. 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.
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%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.72%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 20.20% of the portfolio. Healthcare and Consumer Discretionary round out the top three.
Looking at individual holdings, Dillard's, Inc, (class A) (
DDS Quick Quote DDS - Free Report) accounts for about 0.92% of total assets, followed by Maxlinear, Inc, ( MXL Quick Quote MXL - Free Report) and Sitime Corporation ( SITM Quick Quote SITM - Free Report) .
The top 10 holdings account for about 8.35% 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 lost about -13% so far this year and is down about -8.13% in the last one year (as of 02/07/2022). In the past 52-week period, it has traded between $62.37 and $80.47.
The ETF has a beta of 1.23 and standard deviation of 30.29% for the trailing three-year period, making it a high risk choice in the space. With about 262 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 $10.13 billion in assets, Vanguard SmallCap Growth ETF has $14.13 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.