Launched on 05/08/2007, the First Trust Large Cap Core AlphaDEX ETF (FEX) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Blend segment of the US equity market.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.23 billion, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.
Why Large Cap Blend
Large cap companies typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Annual operating expenses for this ETF are 0.59%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.81%.
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 18.90% of the portfolio. Financials and Healthcare round out the top three.
Looking at individual holdings, Cloudflare, Inc. (class A) (NET) accounts for about 0.68% of total assets, followed by Hubspot, Inc. (HUBS) and Pg&e Corporation (PCG).
The top 10 holdings account for about 5.01% of total assets under management.
Performance and Risk
FEX seeks to match the performance of the Nasdaq AlphaDEX Large Cap Core Index before fees and expenses. The NASDAQ AlphaDEX Large Cap Core Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 500 Large Cap Index.
The ETF has added about 0% so far this year and it’s up approximately 26.03% in the last one year (as of 01/04/2022). In the past 52-week period, it has traded between $73.10 and $92.98.
The ETF has a beta of 1.12 and standard deviation of 24.23% for the trailing three-year period, making it a medium risk choice in the space. With about 376 holdings, it effectively diversifies company-specific risk.
First Trust Large Cap Core AlphaDEX ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FEX is a good option for those seeking exposure to the Style Box – Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track a similar index. While iShares Core S&P 500 ETF has $336.81 billion in assets, SPDR S&P 500 ETF has $455.35 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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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