First Trust Large Cap Growth AlphaDEX Fund (FTC) seeks to track the Defined Large Cap Growth Index, which uses a quantitative screening methodology to select large-cap U.S. growth stocks based on fundamental factors like sales growth, price momentum, and return on assets, then weights them using a proprietary AlphaDEX methodology rather than market capitalization.
How It Works
The fund employs First Trust's AlphaDEX weighting system, which ranks stocks within the large-cap growth universe based on growth and value factors, then assigns higher weights to stocks with the most attractive factor scores. This rules-based approach rebalances quarterly to maintain factor exposures and typically holds 75-100 large-cap growth companies. Unlike traditional cap-weighted funds, lower-scoring stocks receive reduced allocations while higher-scoring stocks get enhanced weightings, creating a factor-tilted portfolio.
Key Features
- Uses proprietary AlphaDEX methodology to overweight fundamentally attractive large-cap growth stocks versus traditional market-cap weighting
- Quarterly rebalancing maintains factor discipline and captures changing fundamental dynamics across growth stock universe
- Zero expense ratio makes it cost-competitive for accessing factor-based large-cap growth exposure with enhanced stock selection
Risks
- This ETF can lose value when growth stocks underperform value stocks, as factor tilts may amplify sector rotation risks during market style shifts
- Quarterly rebalancing and factor-based weighting can create higher turnover costs and tracking error versus broad market growth benchmarks like Russell 1000 Growth
- Large-cap growth stocks can decline 40-50% during bear markets, with factor concentration potentially increasing volatility versus diversified market-cap weighted alternatives
Who Should Own This
Best suited as a satellite holding (10-25% of equity allocation) for investors with 3-5 year time horizons seeking enhanced large-cap growth exposure through factor-based stock selection. Medium-to-high risk tolerance required due to growth stock volatility and factor concentration. Appeals to investors wanting systematic factor tilts without active management fees.