Is First Trust Energy AlphaDEX ETF (FXN) a Strong ETF Right Now?

The First Trust Energy AlphaDEX ETF (FXN), a smart beta energy fund with $280.18 million in assets under management and a 0.61% expense ratio, has shown modest returns of 1.56% year-to-date and 3.71% over the past year (as of 09/17/2025). Despite its AlphaDEX screening methodology, the fund is characterized by high risk (beta 0.94, standard deviation 27.45%) and concentrated holdings, leading the analysis to conclude it is not a suitable option for investors seeking to outperform the Energy ETFs segment, recommending larger, lower-cost alternatives like VDE and XLE (0.09% and 0.08% expense ratios, respectively).

Analysis

The First Trust Energy AlphaDEX ETF (FXN) is a 'smart beta' fund that has demonstrated modest performance, with a year-to-date gain of 1.56% and a one-year return of 3.71% as of mid-September 2025. The fund's strategy, which uses the AlphaDEX screening methodology to select stocks from the Russell 1000, has not yielded superior returns relative to its risk profile. This risk is notably high, characterized by a beta of 0.94 and a three-year standard deviation of 27.45%, alongside a concentrated portfolio of around 40 holdings. A primary concern is the fund's 0.61% annual expense ratio, which is substantially higher than key market-cap-weighted competitors. The analysis explicitly recommends larger, more liquid, and lower-cost alternatives such as the Vanguard Energy ETF (VDE) and the Energy Select Sector SPDR ETF (XLE), which feature expense ratios of just 0.09% and 0.08%, respectively. The moderately negative sentiment score (-0.5) for FXN, contrasted with the positive sentiment (0.4) for VDE and XLE, reinforces the conclusion that FXN is not a compelling option for investors seeking to outperform the energy sector.

Key Decisions for Investors

• Investors holding FXN should re-evaluate their position, as its high 0.61% expense ratio and elevated risk profile are not justified by its recent modest performance, making it a suboptimal choice for sector outperformance.
• For new or reallocated capital seeking energy sector exposure, consider larger, more liquid, and significantly cheaper market-cap weighted ETFs like VDE and XLE, which offer comparable exposure at a fraction of the cost.
• This analysis serves as a caution against 'smart beta' strategies that carry high fees without delivering commensurate returns; investors should critically assess whether a fund's complex methodology and higher costs translate into tangible alpha before investing.