Launched on 05/08/2007, the First Trust Utilities AlphaDEX ETF (FXU) is a smart beta exchange traded fund offering broad exposure to the Utilities/Infrastructure ETFs 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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, and has been able to amass over $849.11 million, which makes it one of the average sized ETFs in the Utilities/Infrastructure ETFs. FXU, before fees and expenses, seeks to match the performance of the StrataQuant Utilities Index.
The StrataQuant Utilities Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for FXU are 0.61%, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 2.05%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 97.5% of the portfolio, the fund has heaviest allocation to the Utilities sector.
Taking into account individual holdings, Consolidated Edison, Inc. (ED) accounts for about 4.39% of the fund's total assets, followed by Edison International (EIX) and National Fuel Gas Company (NFG).
FXU's top 10 holdings account for about 40.16% of its total assets under management.
Performance and Risk
Year-to-date, the First Trust Utilities AlphaDEX ETF return is roughly 11.49% so far, and is up roughly 26.47% over the last 12 months (as of 02/24/2026). FXU has traded between $37.86 $50.18 in this past 52-week period.
The fund has a beta of 0.73 and standard deviation of 15.61% for the trailing three-year period, which makes FXU a medium risk choice in this particular space. With about 41 holdings, it has more concentrated exposure than peers .
Alternatives
First Trust Utilities AlphaDEX ETF is a reasonable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Utilities ETF (VPU) tracks MSCI US Investable Market Utilities 25/50 Index and the State Street Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $8.62 billion in assets, State Street Utilities Select Sector SPDR ETF has $23.79 billion. VPU has an expense ratio of 0.09% and XLU changes 0.08%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Utilities/Infrastructure ETFs
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 Utilities AlphaDEX ETF (FXU): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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