Designed to provide broad exposure to the Style Box - Small Cap Growth category of the market, the First Trust Small Cap Growth AlphaDEX ETF (FYC) is a smart beta exchange traded fund launched on 04/19/2011.
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.
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.
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.
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
Managed by First Trust Advisors, FYC has amassed assets over $920.48 million, making it one of the average sized ETFs in the Style Box - Small Cap Growth. Before fees and expenses, FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index.
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
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.
Operating expenses on an annual basis are 0.70% for this ETF, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.08%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FYC's heaviest allocation is in the Industrials sector, which is about 25% of the portfolio. Its Healthcare and Information Technology round out the top three.
When you look at individual holdings, Praxis Precision Medicines, Inc. (PRAX) accounts for about 1.92% of the fund's total assets, followed by Arrowhead Pharmaceuticals, Inc. (ARWR) and Cidara Therapeutics, Inc. (CDTX).
Its top 10 holdings account for approximately 10.5% of FYC's total assets under management.
Performance and Risk
Year-to-date, the First Trust Small Cap Growth AlphaDEX ETF has gained about 5.64% so far, and it's up approximately 26.99% over the last 12 months (as of 02/11/2026). FYC has traded between $61.01 $103.77 in this past 52-week period.
FYC has a beta of 1.15 and standard deviation of 21.31% for the trailing three-year period, which makes the fund 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 $13.56 billion in assets, Vanguard Small-Cap Growth ETF has $21.28 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.
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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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