Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Growth AlphaDEX ETF (FYC) provides investors broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FYC has been able to amass assets over $1.43 billion, making it one of the average sized ETFs in the Style Box - Small Cap Growth. This particular fund 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.
Cost & Other Expenses
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 one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.17%.
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 in the Healthcare sector - about 27.3% of the portfolio. Industrials and Information Technology round out the top three.
Looking at individual holdings, Acadian Asset Management Inc. (AAMI) accounts for about 0.72% of total assets, followed by First Advantage Corporation (FA) and Oscar Health, Inc. (class A) (OSCR).
The top 10 holdings account for about 6.91% of total assets under management.
Performance and Risk
The ETF return is roughly 29.57% so far this year and is up roughly 48.83% in the last one year (as of 08/17/2026). In the past 52-week period, it has traded between $82.93 and $127.34
The ETF has a beta of 1.17 and standard deviation of 21.80% for the trailing three-year period, making it a high risk choice in the space. With about 265 holdings, it effectively diversifies company-specific risk .
Alternatives
First Trust Small Cap Growth AlphaDEX ETF is not a suitable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. Instead, there are other ETFs in the space which investors should consider.
iShares Russell 2000 Growth ETF (IWO) tracks Russell 2000 Growth Index and the Vanguard Morningstar Small-Cap Growth ETF (VBK) tracks CRSP U.S. Small Cap Growth Index. iShares Russell 2000 Growth ETF has $15.15 billion in assets, Vanguard Morningstar Small-Cap Growth ETF has $24.96 billion. IWO has an expense ratio of 0.24% and VBK changes 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 - Small Cap Growth
Bottom Line
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.
Boost Your Portfolio with Our Top ETF Insights
Zacks' exclusive Fund Newsletter delivers actionable information, top news and analysis, as well as top-performing ETFs, straight to your inbox every week.
Don’t miss out on this valuable resource. It’s free!
Get it now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
First Trust Small Cap Growth AlphaDEX ETF (FYC): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
