Is First Trust Multi Cap Growth AlphaDEX ETF (FAD) a Strong ETF Right Now?

The First Trust Multi Cap Growth AlphaDEX ETF (FAD), a smart beta fund with over $365.95 million in assets under management, aims to outperform the All Cap Growth segment by tracking the Nasdaq AlphaDEX Multi Cap Growth Index through a proprietary stock selection methodology. The ETF, which has an expense ratio of 0.62% and a medium risk profile (beta of 1.15), has delivered robust performance, with year-to-date returns of 20.33% and 23.59% over the last 12 months (as of 10/28/2025), with its heaviest sector allocation in Industrials. While FAD offers diversified exposure, its higher expense ratio stands in contrast to significantly larger and cheaper alternatives like the iShares Morningstar Growth ETF (ILCG) and iShares Core S&P U.S. Growth ETF (IUSG), both charging 0.04%.

Analysis

The First Trust Multi Cap Growth AlphaDEX ETF (FAD) is a smart beta fund designed to outperform the All Cap Growth segment by employing the AlphaDEX stock selection methodology. The ETF has demonstrated strong performance, with a year-to-date return of 20.33% and a 12-month return of 23.59% as of October 28, 2025. With $365.95 million in assets under management, FAD is considered an average-sized ETF in its category.

FAD maintains a medium risk profile, indicated by a beta of 1.15 and a three-year standard deviation of 18.57%. Its portfolio is diversified across 677 holdings, with a significant 24.1% allocation to the Industrials sector, followed by Information Technology and Consumer Discretionary. The fund's operating expense ratio stands at 0.62%, which is noted as being on par with most peer products.

Despite FAD's robust performance, the article highlights significantly larger and more cost-effective alternatives such as the iShares Morningstar Growth ETF (ILCG) and iShares Core S&P U.S. Growth ETF (IUSG). These alternatives boast AUMs of $3.14 billion and $26.1 billion, respectively, and both feature a substantially lower expense ratio of 0.04%. This disparity in fees presents a critical consideration for long-term investor returns.

Key Decisions for Investors

• Investors should evaluate FAD's smart beta methodology and its historical outperformance against its higher expense ratio of 0.62%.
• Consider the significantly lower-cost alternatives like ILCG and IUSG, which offer broad growth exposure at an expense ratio of 0.04%, potentially enhancing long-term net returns.
• Monitor FAD's sector allocation, particularly its heavy weighting in Industrials, and its medium risk profile (beta 1.15) to ensure alignment with portfolio objectives and risk tolerance.