The First Trust Small Cap Growth AlphaDEX ETF (FYC) was launched on April 19, 2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Growth segment of the US equity market.
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.14 billion, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks 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
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.7%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.07%.
Sector Exposure and Top Holdings
ETFs offer a 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 to the Industrials sector -- about 23.3% of the portfolio. Information Technology and Healthcare round out the top three.
Looking at individual holdings, Applied Optoelectronics, Inc. (AAOI) accounts for about 1.68% of total assets, followed by Fastly, Inc. (class A) (FSLY) and Argan, Inc. (AGX).
The top 10 holdings account for about 11.15% of total assets under management.
Performance and Risk
FYC seeks to match the performance of the Nasdaq AlphaDEX Small Cap Growth Index before fees and expenses. The NASDAQ AlphaDEX Small Cap Growth Index is an enhanced which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Growth Index.
The ETF has added about 20.01% so far this year and is up roughly 53.37% in the last one year (as of 06/04/2026). In the past 52-week period, it has traded between $75.16 and $117.50.
The ETF has a beta of 1.18 and standard deviation of 21.53% for the trailing three-year period, making it a high risk choice in the space. With about 265 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Growth AlphaDEX ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FYC, then, is not the best option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. However, there are better ETFs in the space to consider.
The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $14.47 billion in assets, Vanguard Small-Cap Growth Index Fund ETF Shares has $23.66 billion. IWO has an expense ratio of 0.24% and VBK charges 0.05%.
Bottom-Line
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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 Small Cap Growth AlphaDEX ETF (FYC): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).