The First Trust Utilities AlphaDEX ETF (FXU) was launched on 05/08/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Utilities/Infrastructure ETFs 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.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
Managed by First Trust Advisors, FXU has amassed assets over $832.67 million, making it one of the average sized ETFs in the Utilities/Infrastructure ETFs. FXU seeks to match the performance of the StrataQuant Utilities Index before fees and expenses.
The StrataQuant Utilities Index is a modified equal-dollar weighted index designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices through the use of the AlphaDEX screening methodology.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for FXU are 0.61%, which makes it one of the more expensive products in the space.
FXU's 12-month trailing dividend yield is 2.12%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For FXU, it has heaviest allocation in the Utilities sector --about 95.9% of the portfolio.
Looking at individual holdings, National Fuel Gas Company (NFG) accounts for about 4.19% of total assets, followed by Ugi Corporation (UGI) and Pinnacle West Capital Corporation (PNW).
The top 10 holdings account for about 39.9% of total assets under management.
Performance and Risk
The ETF has added about 12.61% so far this year and was up about 22.14% in the last one year (as of 06/29/2026). In the past 52-week period, it has traded between $41.97 and $51.33
The fund has a beta of 0.61 and standard deviation of 15.42% for the trailing three-year period, which makes FXU a medium risk choice in this particular space. With about 41 holdings, it has more concentrated exposure than peers .
Alternatives
First Trust Utilities AlphaDEX ETF is not a suitable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Vanguard Utilities Index Fund ETF Shares (VPU) tracks MSCI US Investable Market Utilities 25/50 Index and the State Street Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. Vanguard Utilities Index Fund ETF Shares has $8.82 billion in assets, State Street Utilities Select Sector SPDR ETF has $23.3 billion. VPU has an expense ratio of 0.09% and XLU 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 Utilities/Infrastructure ETFs
Bottom Line
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First Trust Utilities AlphaDEX ETF (FXU): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).