Launched on 05/08/2007, the First Trust Health Care AlphaDEX ETF (FXH) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $927.58 million, which makes it one of the larger ETFs in the Health Care ETFs. This particular fund seeks to match the performance of the StrataQuant Health Care Index before fees and expenses.
The StrataQuant Health Care Index employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index.
Cost & Other Expenses
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 cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.61%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.82%.
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.
FXH's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Humana Inc. (HUM) accounts for about 2.33% of total assets, followed by The Cigna Group (CI) and Elevance Health Inc. (ELV).
Its top 10 holdings account for approximately 22.59% of FXH's total assets under management.
Performance and Risk
The ETF has added about 4.49% so far this year and is up about 16.22% in the last one year (as of 06/25/2026). In the past 52-week period, it has traded between $98.56 and $119.31
FXH has a beta of 0.75 and standard deviation of 15.17% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 77 holdings, it effectively diversifies company-specific risk .
Alternatives
First Trust Health Care AlphaDEX ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Health Care Index Fund ETF Shares (VHT) tracks MSCI US Investable Market Health Care 25/50 Index and the State Street Health Care Select Sector SPDR ETF ETF (XLV) tracks Health Care Select Sector Index. Vanguard Health Care Index Fund ETF Shares has $17.09 billion in assets, State Street Health Care Select Sector SPDR ETF ETF has $38.51 billion. VHT has an expense ratio of 0.09% and XLV changes 0.08%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs
Bottom Line
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First Trust Health Care AlphaDEX ETF (FXH): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).