The First Trust Utilities AlphaDEX ETF (
FXU Quick Quote FXU - Free Report) was launched on 05/08/2007, and is a passively managed exchange traded fund designed to offer broad exposure to the Utilities - Broad segment of the equity market.
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.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.
The fund is sponsored by First Trust Advisors. It has amassed assets over $458.30 million, making it one of the average sized ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. FXU seeks to match the performance of the StrataQuant Utilities Index before fees and expenses.
The StrataQuant Utilities Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.64%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.85%.
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 in the Utilities sector--about 92.70% of the portfolio.
Looking at individual holdings, Ugi Corporation (
UGI Quick Quote UGI - Free Report) accounts for about 4.84% of total assets, followed by Nrg Energy, Inc. ( NRG Quick Quote NRG - Free Report) and Avangrid, Inc. ( AGR Quick Quote AGR - Free Report) .
The top 10 holdings account for about 41.23% of total assets under management.
Performance and Risk
The ETF return is roughly 9.78% and is up about 11.94% so far this year and in the past one year (as of 08/23/2022), respectively. FXU has traded between $29.53 and $36.06 during this last 52-week period.
The ETF has a beta of 0.55 and standard deviation of 24.59% for the trailing three-year period, making it a medium risk choice in the space. With about 41 holdings, it has more concentrated exposure than peers.
First Trust Utilities 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, FXU is a reasonable option for those seeking exposure to the Utilities/Infrastructure ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Utilities ETF (
VPU Quick Quote VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF ( XLU Quick Quote XLU - Free Report) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $6.08 billion in assets, Utilities Select Sector SPDR ETF has $17.44 billion. VPU has an expense ratio of 0.10% and XLU charges 0.10%. Bottom Line
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