Designed to provide broad exposure to the Small Cap Value segment of the US equity market, the First Trust Small Cap Value AlphaDEX ETF (
FYT Quick Quote FYT - 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 $264.50 million, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.
Why Small Cap Value
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 1.16%.
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 Financials sector--about 31.10% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Renewable Energy Group, Inc. accounts for about 0.93% of total assets, followed by Cornerstone Building Brands Inc. (
CNR Quick Quote CNR - Free Report) and Transocean Ltd. ( RIG Quick Quote RIG - Free Report) .
The top 10 holdings account for about 7.92% of total assets under management.
Performance and Risk
FYT seeks to match the performance of the Nasdaq AlphaDEX Small Cap Value Index before fees and expenses. 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.
The ETF has lost about -4.02% so far this year and was up about 3.67% in the last one year (as of 04/21/2022). In the past 52-week period, it has traded between $47.75 and $54.42.
The ETF has a beta of 1.44 and standard deviation of 35.47% 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 Value 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, FYT is a sufficient option for those seeking exposure to the Style Box - Small Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Value ETF (
IWN Quick Quote IWN - Free Report) and the Vanguard SmallCap Value ETF ( VBR Quick Quote VBR - Free Report) track a similar index. While iShares Russell 2000 Value ETF has $14.21 billion in assets, Vanguard SmallCap Value ETF has $26.93 billion. IWN has an expense ratio of 0.24% and VBR 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.