Designed to provide broad exposure to the Mid Cap Growth segment of the US equity market, the First Trust Mid Cap Growth AlphaDEX Fund (FNY) 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 $319.60 M, making it one of the smaller ETFs attempting to match the Mid Cap Growth segment of the US equity market.
Why Mid Cap Growth
Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus, companies that fall under this category provide a stable and growth-heavy investment.
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. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.70%, making it the most expensive products in the space.
It has a 12-month trailing dividend yield of 0.27%.
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 Information Technology sector--about 16.80% of the portfolio. Industrials and Healthcare round out the top three.
Looking at individual holdings, Arrowhead Pharmaceuticals, Inc. accounts for about 1.22% of total assets, followed by Roku, Inc. (ROKU) and Carvana Co. (CVNA).
The top 10 holdings account for about 9.21% of total assets under management.
Performance and Risk
FNY seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Growth Index.
The ETF has gained about 33.05% so far this year and is up about 44.19% in the last one year (as of 12/25/2019). In the past 52-week period, it has traded between $35.11 and $48.21.
The ETF has a beta of 1.09 and standard deviation of 16.78% for the trailing three-year period, making it a medium risk choice in the space. With about 226 holdings, it effectively diversifies company-specific risk.
First Trust Mid Cap Growth AlphaDEX Fund holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNY is an excellent option for investors seeking exposure to the Style Box - Mid Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares S&P Mid-Cap 400 Growth ETF (IJK) and the iShares Russell Mid-Cap Growth ETF (IWP) track a similar index. While iShares S&P Mid-Cap 400 Growth ETF has $7.59 B in assets, iShares Russell Mid-Cap Growth ETF has $11.64 B. IJK has an expense ratio of 0.24% and IWP charges 0.24%.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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.