The First Trust Utilities AlphaDEX ETF (FXU) made its debut on 05/08/2007, and is a smart beta exchange traded fund that provides broad exposure to the Utilities/Infrastructure ETFs 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
FXU is managed by First Trust Advisors, and this fund has amassed over $1.63 billion, which makes it one of the average sized ETFs in the Utilities/Infrastructure ETFs. FXU seeks to match the performance of the StrataQuant Utilities Index before fees and expenses.
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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for FXU are 0.63%, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.27%.
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.
This ETF has heaviest allocation in the Utilities sector - about 93.2% of the portfolio.
Taking into account individual holdings, Nrg Energy, Inc. (NRG) accounts for about 4.9% of the fund's total assets, followed by Sempra (SRE) and Evergy, Inc. (EVRG).
Its top 10 holdings account for approximately 40.18% of FXU's total assets under management.
Performance and Risk
The ETF has gained about 10.85% and it's up approximately 28.21% so far this year and in the past one year (as of 06/18/2025), respectively. FXU has traded between $32.72 and $43.29 during this last 52-week period.
The fund has a beta of 0.65 and standard deviation of 17.60% 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 not a suitable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Vanguard Utilities ETF (VPU) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $6.82 billion in assets, Utilities Select Sector SPDR ETF has $18.42 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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