Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Mid Cap Value AlphaDEX ETF (FNK) provides investors broad exposure to the Style Box - Mid Cap Value 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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track 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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $202.57 million, which makes it one of the smaller ETFs in the Style Box - Mid Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Value Index.
The NASDAQ AlphaDEX Mid Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Value 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 this ETF are 0.70%, making it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 1.74%.
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.
For FNK, it has heaviest allocation in the Consumer Discretionary sector --about 21.9% of the portfolio --while Financials and Industrials round out the top three.
When you look at individual holdings, Riot Platforms, Inc. (RIOT) accounts for about 1.07% of the fund's total assets, followed by Fluor Corporation (FLR) and Elanco Animal Health Incorporated (ELAN).
FNK's top 10 holdings account for about 8.98% of its total assets under management.
Performance and Risk
The ETF has lost about -1.07% and is down about -2.35% so far this year and in the past one year (as of 07/17/2025), respectively. FNK has traded between $43.24 and $58.28 during this last 52-week period.
The fund has a beta of 1.06 and standard deviation of 22.04% for the trailing three-year period, which makes FNK a medium risk choice in this particular space. With about 226 holdings, it effectively diversifies company-specific risk .
Alternatives
First Trust Mid Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Russell Mid-Cap Value ETF (IWS) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE) tracks CRSP U.S. Mid Cap Value Index. iShares Russell Mid-Cap Value ETF has $13.43 billion in assets, Vanguard Mid-Cap Value ETF has $17.97 billion. IWS has an expense ratio of 0.23% and VOE changes 0.07%.
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 Value
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.
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First Trust Mid Cap Value AlphaDEX ETF (FNK): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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