First Trust Energy AlphaDEX® Fund (FXN)

Overview

The First Trust Energy AlphaDEXu00ae Fund (FXN) seeks investment results that correspond generally to the price and yield of an equity index called the StrataQuantu00ae Energy Index. The fund employs an AlphaDEXu00ae selection methodology to select energy companies believed to have the potential to generate positive alpha.

Reputation and Reliability

First Trust is a well-established ETF provider with a strong track record in the market.

Management Expertise

First Trust has a dedicated team of investment professionals managing their ETFs.

Goal

To provide investment results that correspond generally to the price and yield, before fees and expenses, of the StrataQuantu00ae Energy Index.

Investment Approach and Strategy

Strategy: The fund aims to track the StrataQuantu00ae Energy Index, which employs a quantitative methodology to select and weight energy companies based on growth factors.

Composition The ETF holds primarily stocks of US energy companies across various sub-sectors, including oil & gas exploration, production, refining, and energy equipment & services.

Market Share: FXN holds a moderate market share within the energy ETF sector.

Total Net Assets (AUM): 438000000

Key Competitors

• Energy Select Sector SPDRu00ae Fund (XLE)
• Vanguard Energy ETF (VDE)
• iShares U.S. Energy ETF (IYE)

Competitive Landscape

The energy ETF sector is dominated by large, passively managed ETFs like XLE and VDE. FXN differentiates itself through its AlphaDEXu00ae methodology which seeks to outperform traditional market-cap weighted indexes. This strategy may lead to periods of outperformance but also introduces higher tracking error and potentially higher volatility compared to its market-cap weighted peers. The main disadvantages compared to the competition are its market share and potentially higher expense ratios.

Historical Performance: Historical performance data is readily available from financial data providers. This should be updated with recent performance numbers.

Benchmark Comparison: The ETF's performance can be compared to the S&P 500 Energy Sector index or the StrataQuantu00ae Energy Index.

Expense Ratio: 0.62

Average Trading Volume

The ETF's average daily trading volume is moderate, indicating reasonable liquidity for most investors.

Bid-Ask Spread

The bid-ask spread is generally tight, suggesting relatively low trading costs.

Market Environment Factors

Energy sector performance is influenced by factors like crude oil prices, geopolitical events, regulatory changes, and the transition to renewable energy sources.

Growth Trajectory

The ETF's growth trajectory is tied to the performance of the energy sector and the success of its AlphaDEXu00ae selection methodology. Changes in the strategy and holdings are periodically disclosed in the fund's prospectus.

Competitive Edge

FXN's competitive advantage lies in its proprietary AlphaDEXu00ae methodology, which aims to select stocks with strong growth characteristics within the energy sector. This active management approach provides the potential for outperformance compared to passively managed, market-cap weighted ETFs. However, the outperformance comes with the risk of underperformance and greater volatility. FXN also focuses on growth factors, potentially capturing opportunities missed by traditional indices. Lastly, the ETF offers a differentiated approach to the energy sector investing, appealing to investors seeking more than just market-cap weighted exposure.

Volatility

The fund's volatility is expected to be high due to the inherent volatility of the energy sector.

Market Risk

The fund is subject to the risks associated with the energy sector, including commodity price fluctuations, regulatory changes, and environmental concerns.

Ideal Investor Profile

The ideal investor is one who is seeking exposure to the energy sector with the potential for outperformance compared to traditional market-cap weighted indexes, and is comfortable with higher volatility.

Market Risk

The fund is suitable for investors with a higher risk tolerance and a longer-term investment horizon.

The First Trust Energy AlphaDEXu00ae Fund (FXN) offers exposure to the energy sector with a quantitatively-driven selection process aiming for alpha generation. Its performance is closely linked to energy market dynamics and the success of its AlphaDEXu00ae methodology. It's a niche player in a market dominated by XLE and VDE. FXNu2019s higher expense ratio and potential volatility should be carefully considered by investors.

Data Sources:

• First Trust Website
• ETF.com
• Morningstar

Disclaimers:

The data and analysis provided are for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor before making any investment decisions. Market share data is estimated and may vary.