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A smart beta exchange traded fund, the First Trust Large Cap Core AlphaDEX ETF (FEX) debuted on 05/08/2007, and offers broad exposure to the Style Box - Large Cap Blend 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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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. FEX has been able to amass assets over $1.17 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund 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.

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.

Operating expenses on an annual basis are 0.58% for FEX, making it on par with most peer products in the space.

FEX's 12-month trailing dividend yield is 1.37%.

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.

For FEX, it has heaviest allocation in the Financials sector --about 19.30% of the portfolio --while Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Cvs Health Corporation (CVS) accounts for about 0.68% of total assets, followed by Exelon Corporation (EXC) and Howmet Aerospace Inc. (HWM).

Its top 10 holdings account for approximately 5.35% of FEX's total assets under management.

Performance and Risk

Year-to-date, the First Trust Large Cap Core AlphaDEX ETF has lost about -6.92% so far, and was up about 3.78% over the last 12 months (as of 04/23/2025). FEX has traded between $90.17 and $112.88 in this past 52-week period.

The ETF has a beta of 1.01 and standard deviation of 17.78% 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.

Alternatives

First Trust Large Cap Core AlphaDEX ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

SPDR S&P 500 ETF (SPY) tracks S&P 500 Index and the Vanguard S&P 500 ETF (VOO) tracks S&P 500 Index. SPDR S&P 500 ETF has $548.28 billion in assets, Vanguard S&P 500 ETF has $556.04 billion. SPY has an expense ratio of 0.09% and VOO charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

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 Large Cap Core AlphaDEX ETF (FEX): ETF Research Reports

Exelon Corporation (EXC) : Free Stock Analysis Report

CVS Health Corporation (CVS) : Free Stock Analysis Report

SPDR S&P 500 ETF (SPY): ETF Research Reports

Vanguard S&P 500 ETF (VOO): ETF Research Reports

Howmet Aerospace Inc. (HWM) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.