A smart beta exchange traded fund, the First Trust Mid Cap Core AlphaDEX ETF (
FNX Quick Quote FNX - Free Report) debuted on 05/08/2007, and offers broad exposure to the Style Box - Mid Cap Blend 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $1 billion, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Core Index.
The NASDAQ AlphaDEX Mid Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap 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 FNX are 0.59%, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 1.26%.
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.
Representing 21.80% of the portfolio, the fund has heaviest allocation to the Industrials sector; Consumer Discretionary and Financials round out the top three.
When you look at individual holdings, Super Micro Computer, Inc. (
SMCI Quick Quote SMCI - Free Report) accounts for about 0.84% of the fund's total assets, followed by Carnival Corporation ( CCL Quick Quote CCL - Free Report) and Builders Firstsource, Inc. ( BLDR Quick Quote BLDR - Free Report) .
The top 10 holdings account for about 5.42% of total assets under management.
Performance and Risk
So far this year, FNX has gained about 5.15%, and is up roughly 8.37% in the last one year (as of 09/22/2023). During this past 52-week period, the fund has traded between $80.01 and $100.97.
FNX has a beta of 1.22 and standard deviation of 21.46% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 450 holdings, it effectively diversifies company-specific risk.
First Trust Mid Cap Core AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Mid-Cap ETF (
VO Quick Quote VO - Free Report) tracks CRSP US Mid Cap Index and the iShares Core S&P Mid-Cap ETF ( IJH Quick Quote IJH - Free Report) tracks S&P MidCap 400 Index. Vanguard Mid-Cap ETF has $52.19 billion in assets, iShares Core S&P Mid-Cap ETF has $70.93 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.
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 - Mid Cap Blend.
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.