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Should First Trust Mid Cap Growth AlphaDEX Fund (FNY) Be on Your Investing Radar?

Sweta Killa

The First Trust Mid Cap Growth AlphaDEX Fund (FNY) was launched on 04/19/2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Mid Cap Growth segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $297.74 M, making it one of the smaller ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

Mid cap companies have market capitalization between $2 billion and $10 billion. They usually have higher growth prospects than large cap companies and are less volatile than small cap companies. Thus, companies that fall under this category provide a stable and growth-heavy investment.

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Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.70%, making it the most expensive products in the space.

It has a 12-month trailing dividend yield of 0.10%.

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.

This ETF has heaviest allocation to the Information Technology sector--about 24.10% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Roku, Inc. (ROKU) accounts for about 1.21% of total assets, followed by Acadia Pharmaceuticals Inc. (ACAD) and Fti Consulting, Inc. (FCN).

The top 10 holdings account for about 9.12% of total assets under management.

Performance and Risk

FNY seeks to match the performance of the Nasdaq AlphaDEX Mid Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Mid Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 600 Mid Cap Growth Index.

The ETF has gained about 25.50% so far this year and is down about -1.79% in the last one year (as of 09/26/2019). In the past 52-week period, it has traded between $33.42 and $47.28.

The ETF has a beta of 1.10 and standard deviation of 16.82% for the trailing three-year period, making it a medium risk choice in the space. With about 225 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Mid Cap Growth AlphaDEX Fund holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNY is an excellent option for investors seeking exposure to the Style Box - Mid Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares S&P Mid-Cap 400 Growth ETF (IJK) and the iShares Russell Mid-Cap Growth ETF (IWP) track a similar index. While iShares S&P Mid-Cap 400 Growth ETF has $7.36 B in assets, iShares Russell Mid-Cap Growth ETF has $10.86 B. IJK has an expense ratio of 0.24% and IWP charges 0.24%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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 Mid Cap Growth AlphaDEX Fund (FNY): ETF Research Reports
 
iShares Russell Mid-Cap Growth ETF (IWP): ETF Research Reports
 
ACADIA Pharmaceuticals Inc. (ACAD) : Free Stock Analysis Report
 
FTI Consulting, Inc. (FCN) : Free Stock Analysis Report
 
Roku, Inc. (ROKU) : Free Stock Analysis Report
 
iShares S&P Mid-Cap 400 Growth ETF (IJK): ETF Research Reports
 
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Zacks Investment Research