Said differently, FXO qualifies as a smart beta ETF. While the terminology, and some of the AlphaDEX ETFs’ performances for that matter, have been derided, there is no escaping that FXO has been less bad than traditional financial services ETFs during times of market tumult.
FXO debuted in May 2007, so investors can look back and evaluate the ETF’s performance during the global financial crisis. FXO slumped 62.2% from the start of 2008 through March 9, 2009 market bottom. Of course, that is nothing to brag about, but that performance was 1,000 basis points better than that of the cap-weighted Vanguard Financials ETF (NYSEArca: VFH). To boot, FXO was significantly less volatile than VFH during the crisis.
Over the three years ending July 31, FXO’s standard deviation was about 240 basis points lower than the S&P Financials Index while sporting a lower beta and higher Sharpe Ratio, according to issuer data. During that time, FXO has outpaced VFH by 410 basis points while being slightly less volatile as well.
First Trust Financial AlphaDEX Fund