It is a multi-cap value ETF that uses the AlphaDEX selection methodology to pick US large-, mid-, and small-cap stocks with strong value characteristics through rules-based scoring. Unlike market-cap weighting, it reallocates weights based on fundamental scores.

It suits value-oriented investors who want to pursue excess returns through rules-based stock selection rather than a plain market-cap-weighted value index.

It is a passive (index-tracking) ETF managed by First Trust.

From the Nasdaq US large-, mid-, and small-cap indexes, the fund selects stocks with strong value characteristics using AlphaDEX scores and assigns tiered weights based on those scores. By applying fundamentals-based weighting instead of market-cap weighting, it creates exposure that differs from traditional value indexes, and it readjusts holdings and weights every quarter.

• Rules-based AlphaDEX value selection
• Multi-cap diversification across large, mid, and small caps

Assets under management (AUM) stand at $162.2M, and the annual expense ratio is 0.66%.

Compared with broad value ETFs such as VTV and IWD, its holdings differ because of rules-based selection, and given its actively tilted selection structure, the cost burden is somewhat higher.

Because it is tied to the value style, its performance relative to growth stocks has diverged depending on the market phase. The relative strength of the value style tends to fluctuate with interest rates and the economic cycle.

As a member of the smart beta value category, its asset base is small to mid-sized compared with broad core value ETFs. Interest tends to rise when preference for the value style strengthens.

Its strengths are rules-based value selection and multi-cap diversification, while its drawback is a higher fee than broad passive value ETFs.

The three ETFs shown in the table, VTV, IWD, and IVE, are broad passive ETFs in the same value category and serve as direct, lower-fee substitutes, while VBR is a variant focused on small-cap value. If you want plain market-cap-weighted value exposure rather than rules-based selection, these are more cost-efficient, and you can also consider FTA, a large-cap value ETF from the same First Trust AlphaDEX family.

Here are the points to review before investing in FAB. Because it is a smart beta ETF that selects value stocks using rules, it is wise to check costs, turnover, style exposure, and currency effects in advance.

Periods of value style weakness, high turnover, and the fee burden relative to broad core ETFs are the main sources of volatility. In markets led by growth stocks, its relative performance may be weak.

It suits investors who want exposure differentiated from core value ETFs through rules-based value selection. If cost is the priority, broad passive value ETFs such as VTV and IWD are the better choice, while investors drawn to the AlphaDEX selection methodology may opt for FAB.