A Comparative Analysis of the FEX and SPY Portfolios

Ivan Kading - Author

Nov. 20 2015, Published 12:24 p.m. ET

Negative performance

The First Trust Large Cap Core AlphaDEX ETF (FEX) follows the index movement of the Defined Large Cap Core Index. FEX has performed negatively in the market with a year-to-date (or YTD) return of -1.8%. The primary reason for FEX’s poor performance is its sensitive-to-market alpha holdings.

The market has seen a correction phase this year, which adversely affected the returns of these alpha holdings. FEX has given a total annualized return of 6.00% to its investors since its inception. The top five holdings of FEX are Amazon (AMZN), First Solar (FSLR), Murphy Oil Corp. (MUR), NVIDIA Corp (NVDA), and Applied Materials (AMAT).

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Reduced performance

The above chart presents the year-to-date performance of a mock portfolio of 30% FEX and 80% SPY, compared with the market itself to better understand the effect of FEX in one’s portfolio. Due to the negative returns of FEX this year, the portfolio has observed a reduced performance.

As of November 19, 2015, the year-to-date (or YTD) return of the combined portfolio is 1.56%, which is lower than the YTD market return of 3.0%.


Different types of smart beta ETFs behave differently in the market. A low volatility smart beta ETF is beneficial during a falling market, and a high alpha or beta fund such as FEX can be an investment option during a booming market.

The primary aim of any smart beta fund is to provide low-cost, quality investment options. Potential investors should thoroughly study of each type of smart beta fund before moving forward.


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