The fund tracks the Nasdaq AlphaDEX Large Cap Value Index, combining value and growth metrics to hand-pick 187 US large-cap stocks with high investment appeal. Its defining feature is a smart beta layer added to traditional value investing to improve management efficiency.

It suits aggressive investors who want exposure to US large-cap value stocks while seeking higher return opportunities than the market average, as well as investors who prefer quantitative strategies based on corporate fundamentals.

First Trust launched the ETF in 2007, and it is passively managed (index tracking).

Stocks are ranked through a combined evaluation of value factors such as book value to assets, cash flow, and return on assets (ROA), along with growth factors such as price appreciation. The top-ranked stocks are divided into five groups, and a tiered equal-weighting method assigns greater weight to higher-ranked groups.

• Application of the proprietary AlphaDEX quantitative selection model
• Fundamentals-based weighting that minimizes the influence of market capitalization

Assets under management (AUM) stand at $1.4B, and the expense ratio is 0.58% per year.

Compared with low-cost index-tracking ETFs such as VTV or IVE shown in the table, its management fee is somewhat higher. However, because it relies on a fundamentals-based stock selection process rather than simple market-cap weighting, it may deliver differentiated performance versus the market during value-driven rallies.

The fund generally moves in step with the value sector, depending on the interest rate environment and corporate earnings cycles. Recently, it also showed a positive trend as AI-related infrastructure companies with strong value metrics were added to the portfolio.

Investment demand for smart beta strategies and capital seeking a stable, large-cap-focused portfolio have continued to flow in. During periods of rising market volatility, its defensive character, built around stocks with solid fundamentals, sometimes stands out.

The fund aims for excess returns through the selection of high-quality value stocks, but investors should consider its relatively high fee and the potential for tracking error stemming from its complex strategy.

VTV, IWD, and IVE, which you can see in the table, are standard choices in the US large-cap value market and carry lower fees than FTA. If you want to focus on small and mid-cap stocks within the value segment, VBR could be an alternative. Meanwhile, if you prefer a market-cap-weighted approach while still pursuing cost efficiency, SPYV is a good option.

Here are the key points to review before investing in FTA. Beyond simple value investing, it is important to clearly understand in advance how the specialized AlphaDEX strategy works, along with its strengths and weaknesses.

Depending on market conditions, the strengths of a smart beta strategy can become weaknesses. Keep in mind that, given the nature of quantitative models, past data does not guarantee future performance.

This is a smart beta ETF suited to investors who place more weight on the sophistication of stock selection and the potential for excess returns than on cost. It works well as a way to complement the value-stock allocation in a portfolio.