Designed to provide broad exposure to the Style Box - All Cap Growth category of the market, the First Trust Multi Cap Growth AlphaDEX ETF (FAD) is a smart beta exchange traded fund launched on 05/08/2007.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
FAD is managed by First Trust Advisors, and this fund has amassed over $365.95 million, which makes it one of the average sized ETFs in the Style Box - All Cap Growth. FAD, before fees and expenses, seeks to match the performance of the Nasdaq AlphaDEX Multi Cap Growth Index.
The NASDAQ AlphaDEX Multi Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index, NASDAQ US 600 Mid Cap Index and NASDAQ US 700 Small Cap Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.62% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.27%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For FAD, it has heaviest allocation in the Industrials sector --about 24.1% of the portfolio --while Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Rocket Lab Corporation (RKLB) accounts for about 0.64% of total assets, followed by Vertiv Holdings Co (VRT) and Advanced Micro Devices, Inc. (AMD).
Its top 10 holdings account for approximately 5.04% of FAD's total assets under management.
Performance and Risk
Year-to-date, the First Trust Multi Cap Growth AlphaDEX ETF has added roughly 20.33% so far, and is up about 23.59% over the last 12 months (as of 10/28/2025). FAD has traded between $114.67 $166.16 in this past 52-week period.
The ETF has a beta of 1.15 and standard deviation of 18.57% for the trailing three-year period, making it a medium risk choice in the space. With about 677 holdings, it effectively diversifies company-specific risk .
Alternatives
First Trust Multi Cap Growth AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Morningstar Growth ETF (ILCG) tracks MORNINGSTAR US LARGE-MID CP BRD GRWTH ID and the iShares Core S&P U.S. Growth ETF (IUSG) tracks S&P 900 Growth Index. iShares Morningstar Growth ETF has $3.14 billion in assets, iShares Core S&P U.S. Growth ETF has $26.1 billion. ILCG has an expense ratio of 0.04% and IUSG changes 0.04%.
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 - All 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.
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First Trust Multi Cap Growth AlphaDEX ETF (FAD): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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