A smart beta exchange traded fund, the First Trust Small Cap Growth AlphaDEX ETF (FYC) debuted on 04/19/2011, and offers broad exposure to the Style Box - Small Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
Because the fund has amassed over $750.51 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Growth. FYC is managed by First Trust Advisors. 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
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.
Annual operating expenses for FYC are 0.71%, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 0.23%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FYC, it has heaviest allocation in the Healthcare sector --about 25.8% of the portfolio --while Industrials and Information Technology round out the top three.
Looking at individual holdings, Microvast Holdings, Inc. (MVST) accounts for about 1% of total assets, followed by Cleanspark, Inc. (CLSK) and Eos Energy Enterprises, Inc. (EOSE).
Its top 10 holdings account for approximately 8.6% of FYC's total assets under management.
Performance and Risk
The ETF return is roughly 29.01% and was up about 20.65% so far this year and in the past one year (as of 12/12/2025), respectively. FYC has traded between $61.01 and $99.82 during this last 52-week period.
The ETF has a beta of 1.15 and standard deviation of 21.37% 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 a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Russell 2000 Growth ETF (IWO) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK) tracks CRSP U.S. Small Cap Growth Index. iShares Russell 2000 Growth ETF has $13.83 billion in assets, Vanguard Small-Cap Growth ETF has $21.42 billion. IWO has an expense ratio of 0.24% and VBK 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 - 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.
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First Trust Small Cap Growth AlphaDEX ETF (FYC): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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