Launched on 05/08/2007, the First Trust Energy AlphaDEX ETF (FXN) is a passively managed exchange traded fund designed to provide a broad exposure to the Energy - Broad segment of the equity market.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.53 billion, making it one of the larger ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FXN seeks to match the performance of the StrataQuant Energy Index before fees and expenses.
The StrataQuant Energy 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.
Costs
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 counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.64%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.70%.
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 in the Energy sector--about 94.60% of the portfolio.
Looking at individual holdings, Conocophillips (COP) accounts for about 5.13% of total assets, followed by Chevron Corporation (CVX) and Pioneer Natural Resources Company (PXD).
The top 10 holdings account for about 45.71% of total assets under management.
Performance and Risk
So far this year, FXN return is roughly 26.19%, and is up about 57.91% in the last one year (as of 07/20/2022). During this past 52-week period, the fund has traded between $9.56 and $18.74.
The ETF has a beta of 1.93 and standard deviation of 48.75% for the trailing three-year period, making it a high risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.