What's The Difference? First Trust China ETF Vs. FXI

Continuing with our look at the new AlphaDex suite of international ETFs recently introduced by First Trust, today we examine the First Trust China AlphaDex Fund FCA in a comparison against the big kahuna of China-specific ETFs, the iShares FTSE China 25 Index Fund FXI. As we saw with our examinations of the AlphaDex Brazil and South Korea ETFs, First Trust is knocking heads with some very stiff competition in the form of FXI. In fact, it should be noted that FCA probably faces more competition than any of the other AlphaDex funds because the China ETF universe is far larger than what we see with Brazil and South Korea. Not only does FCA have to contend with FXI, but the PowerShares Golden Dragon Halter USX China ETF PGJ and the SPDR S&P China ETF GXC are also formidable rivals in waiting, just to name a pair. Competing against FXI means going up against the most liquid of the China-specific ETFs and a fund that is almost seven-years old with more than $8.4 billion in assets under management. Again, the AlphaDex offering features a higher expense ratio at 0.8% compared to 0.72% for FXI, but as we have previously seen, there are some reasons to consider what First Trust has brought to the table here. The knock on FXI has been, and will be until further notice, an almost obscene weight of over 51% to the dicey Chinese financial services sector. FCA offers just 22% exposure to this group and that is a point in the new ETF's favor. Yes, financials are also the biggest sector weight in FCA, but materials at 20% and industrials at almost 19% also figure prominently in the new ETF's mix. Those two sectors combine for less than 15% of FXI's weight. FCA also holds nearly double the stocks (50) as FXI (26) does, making for a more balanced play on the China growth story. In summary, FCA has a lot to offer in comparison to FXI. While it would likely take years for the new fund to challenge FXI's AUM throne, FCA's superior sector mix and preferable exposure to some Chinese mid-caps could mean the rookie fund could outperform its older rival in the near future.