The First Trust Small Cap Core AlphaDEX ETF (FYX) was launched on 8 May 2007, providing exposure to the Small Cap Blend market category. This smart beta ETF stands out from traditional market cap-weighted products by tracking non-cap weighted strategies.
Smart beta ETFs utilise various methods, from simple to complex, like equal-weighting or volatility/momentum factors. FYX is backed by First Trust Advisors, with assets totalling over $971.03 million. It aims to replicate the performance of the Nasdaq AlphaDEX Small Cap Core Index, selecting stocks from the NASDAQ US 700 Small Cap Index.
FYX’s operating expenses are 0.58%, and its 12-month trailing dividend yield is 0.61%. Holdings focus on Financials (18.5%), followed by Industrials and Healthcare. The top holdings include Praxis Precision Medicines, Inc. (0.86%), Globalstar, Inc., and Arrowhead Pharmaceuticals, Inc.
In performance, FYX has risen about 4.25% year-to-date and 16.7% over the past year. It traded between $79.22 and $117.95 in the last 52 weeks, with a beta of 1.07 and a standard deviation of 21.06% over three years. With 525 holdings, it diversifies specific company risks.
Alternatives in the Small Cap Blend segment include iShares Russell 2000 ETF (IWM) and iShares Core S&P Small-Cap ETF (IJR), with respective assets of $76.57 billion and $91.26 billion.
As we begin 2026, we see that small-cap stocks generally underperformed large-caps in the final quarter of 2025, a trend we must now evaluate. The latest December 2025 jobs report showed continued economic strength, raising questions about the Federal Reserve’s timeline for any potential rate adjustments this quarter. This economic uncertainty creates a complex environment for funds like FYX that focus on domestically-oriented smaller companies.
Given its beta of 1.07 and a historical standard deviation over 21%, we should anticipate that FYX will exhibit amplified movements relative to the broader market in the coming weeks. The fund’s heavy weighting in financials, at about 18.5%, makes it particularly sensitive to interest rate speculation, a factor that caused notable volatility in that sector during 2025. This concentration means any surprises from the Fed could have an outsized impact on the ETF’s performance.
Implied volatility on Russell 2000 options has recently climbed above its three-month average, indicating that the market is bracing for larger price swings. This environment could make selling options premium through strategies like covered calls on an existing FYX position an interesting proposition for generating income. Traders anticipating a sharp move after the next Fed meeting, but who are unsure of the direction, might consider buying straddles to play the increase in volatility itself.
We must also be mindful that the fourth-quarter 2025 earnings season is about to begin, which will bring company-specific news into focus. While FYX holds over 500 stocks, a pattern of negative earnings surprises within its key industrial or healthcare sectors could pressure the fund. Monitoring early reports from these sectors will be critical to gauging near-term sentiment and potential price action.
