The First Trust Mid Cap Growth AlphaDEX ETF (FNY) made its debut on April 19, 2011, and has become a popular choice for investors seeking exposure to the mid-cap growth segment of the market. FNY is a smart beta ETF, which means it employs a non-cap weighted strategy to select stocks based on specific criteria, aiming to outperform traditional market cap weighted indexes.
What Are Smart Beta ETFs?
Traditionally, the ETF industry has been dominated by market cap weighted indexes. These indexes simply reflect the market capitalization of the companies they include, providing a convenient and low-cost way to track the overall market or specific segments. However, investors who believe they can outperform the market often turn to smart beta ETFs, which utilize non-cap weighted strategies. These strategies focus on identifying stocks with better risk-return characteristics based on various fundamental factors like earnings, profitability, or momentum.
FNY’s Index and Management
The fund is managed by First Trust Advisors and seeks to track the performance of the NASDAQ AlphaDEX Mid Cap Growth Index. This index utilizes the AlphaDEX stock selection methodology to choose stocks from the NASDAQ US 600 Mid Cap Growth Index, aiming to identify those with the potential for superior risk-adjusted returns. FNY has amassed over $346.61 million in assets, making it a mid-sized ETF in the Style Box – Mid Cap Growth category.
Cost and Expenses
Cost is a crucial factor when selecting an ETF, as lower expense ratios can significantly impact returns over time. FNY has an annual operating expense ratio of 0.70%, which places it among the higher-cost ETFs in this space. The fund also has a trailing dividend yield of 0.08%.
Sector Exposure and Top Holdings
FNY is a diversified fund, offering exposure to various sectors. Its largest allocation is to the Industrials sector, representing 23.80% of the portfolio. Consumer Discretionary and Healthcare follow closely. The top 10 holdings account for approximately 8.31% of total assets under management. Some of the fund’s prominent holdings include Coca-Cola Consolidated Inc. (COKE), Sprouts Farmers Market, Inc. (SFM), and The Ensign Group, Inc. (ENSG).
Performance and Risk
FNY has delivered strong performance, gaining approximately 10.69% year-to-date and 16.13% over the past year (as of 09/04/2024). The ETF has traded between $55.49 and $77.95 during the past 52 weeks. With a beta of 1.14 and a standard deviation of 22.52% over the trailing three-year period, FNY is considered a medium-risk investment in the mid-cap growth space. It diversifies company-specific risk with its portfolio of around 226 holdings.
Alternatives
While FNY offers a strong option for investors seeking exposure to the mid-cap growth segment, other ETFs are available. Some alternatives include:
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Vanguard Mid-Cap Growth ETF (VOT):
Tracks the CRSP U.S. Mid Cap Growth Index and has a much lower expense ratio of 0.07%. This ETF has amassed over $13.39 billion in assets.*
iShares Russell Mid-Cap Growth ETF (IWP):
Tracks the Russell MidCap Growth Index and has an expense ratio of 0.23%. This ETF holds over $14.07 billion in assets.Investors seeking lower-cost and less risky options might consider traditional market cap weighted ETFs that aim to track the returns of the Style Box – Mid Cap Growth segment.
