CHAPMAN AND CUTLER LLP 111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
April 8, 2011
VIA EDGAR CORRESPONDENCE
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Houghton Hallock
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: First Trust Exchange-Traded AlphaDEX(R) Fund
(File Nos. 333-140895, 811-22019)
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Dear Mr. Hallock:
This letter responds to your comments regarding the registration statement
filed on Form N-1A for First Trust Exchange-Traded AlphaDEX(R) Fund (the
"Trust") with the Securities and Exchange Commission (the "Commission") on
January 19, 2011. The Trust consists of the First Trust Mid Cap Growth
AlphaDEX(R) Fund, First Trust Mid Cap Value AlphaDEX(R) Fund, First Trust Small
Cap Growth AlphaDEX(R) Fund and First Trust Small Cap Value AlphaDEX(R) Fund
(each, a "Fund," and collectively, the "Funds"). Your comments were transmitted
to us via telephone conference on or about March 8, 2011.
This letter serves to respond to your comments. For your convenience, we
have structured our response to address each of your comments in the order
transmitted to us. Furthermore, we have duly noted that comments on the summary
information for the first Fund described in the prospectus, the First Trust Mid
Cap Growth AlphaDEX(R) Fund, applies similarly to each of the other Funds.
Accordingly, our responses shall apply similarly to each of the Funds.
PROSPECTUS
COMMENT 1 - COVER PAGE
The cover page includes substantial disclosure that does not appear to be
required as a condition of any exemptive relief permitted or required by Item
l(a) of Form N-1A. Please revise the cover page to limit, to the extent
possible, the information it contains to disclosure required by applicable
exemptive relief and items listed in Item 1(a) of Form N-lA. See General
Instruction (c)(3)(a) of Form N-1A.
RESPONSE TO COMMENT 1
The prospectus has been revised in response to this comment.
COMMENT 2 - INVESTMENT OBJECTIVE
The First Trust Mid Cap Growth AlphaDEX(R) Fund seeks investment results
generally corresponding to an equity index called the Defined Mid Cap Growth
Index (the "Index"). The Index is in a family of indexes developed, maintained
and sponsored by Standard & Poor's Financial Services LLC ("S&P"), and was
designed by S&P to select stocks from another index, the S&P MidCap 400 Growth
Index, comprising the Index.
Given S&P's important role as sponsor of the Index, and the fact that S&P
is cited in the full name of the S&P MidCap 400 Growth Index, please
supplementally confirm that S&P is not included in the Index's full name and
briefly explain the reasons, if any, why not.
RESPONSE TO COMMENT 2
S&P owns all rights to the Index and the reasons for not including the
"S&P" in the name of the Index is unknown to the Fund.
COMMENT 3 - FEE TABLE
On page 1, please insert the words "percentage of the" between the words
"as a" and "value" in the parenthetical that follows the heading "Annual Fund
Operating Expenses."
RESPONSE TO COMMENT 3
The prospectus has been revised in response to this comment.
COMMENT 4 - FEE TABLE
If the percentage amounts to be added to the fee table will not include
any amount for a 12b-l fee, please revise footnote 1 by inserting the words
"that permits it to pay up to 0.25% per annum" immediately after the words "a
12b-l plan." However, if a 12b-l fee will be shown in the table, please delete
footnote 1, because Form N-lA would not require or permit it.
RESPONSE TO COMMENT 4
The prospectus has been revised in response to this comment.
COMMENT 5 - FEE TABLE
Please delete the word "net" before the words "annual operating expenses"
in the second sentence of the Example. Please also change the second sentence by
adding "and thereafter at 0.95% to represent the imposition of the 12b-1 fee of
0.25% per annum of the Fund's average daily net assets." Delete the next
sentence.
RESPONSE TO COMMENT 5
The prospectus has been revised in response to this comment.
COMMENT 6 - PRINCIPAL INVESTMENT STRATEGIES
The prospectus states, at page 1, that 90% of the "net assets" of the
First Trust Mid Cap Growth AlphaDEX(R) Fund will be invested in common stocks
that comprise the Index, which S&P will select from stocks comprising the S&P
MidCap 400 Growth Index.
(a) Please insert the words "plus the amount of any borrowings for
investment purposes" immediately following "net assets" as Rule 35d-l provides.
(b) Please specify the number of stocks included in the Index, either in
this section or subsequently in the prospectus under "Index Information - First
Trust Mid Cap Growth AlphaDEX(R) Fund."
(c) The prospectus states under the heading "Investment Strategies," that
in certain cases the Funds may invest in securities that are not included in
their respective Indices and use futures or derivative instruments.
(i) Please briefly describe in the summary section for the First
Trust Mid Cap Growth AlphaDEX(R) Fund and other Funds, as appropriate, the
circumstances under which the First Trust Mid Cap Growth AlphaDEX(R) Fund
and other Funds expect to invest in securities not included in their
respective Indices.
(ii) Please also identify the futures and derivatives instruments
each Fund expects to use principally and how each Fund expects to use
them. See letter dated July 30, 2010, to the Investment Company Institute
selling forth the Division's views on derivatives-related disclosure.
(d) Please explain the reasons for the delay of five business days before
changes to the Index will be effective after the Index is rebalanced and
reconstituted at quarter end.
(e) Please provide the market cap ranges for each Fund.
RESPONSE TO COMMENT 6
(a) The prospectus has been revised in response to this comment.
(b) The "Index Information" in the prospectus has been revised in response
to this comment.
(c) (i) The prospectus has been revised in response to this comment.
(ii) The Fund does not intend to use futures and derivative
instruments as a part of its principal investment strategies.
(d) The delay of five business days before changes to the Index will be
effective is pursuant to the license agreement for the Index, which states that
with respect to each Index changes are effective at the open on the sixth
business day following the quarter end.
(e) The prospectus has been revised in response to this comment.
COMMENT 7 - PRINCIPAL RISKS
Market Capitalization Risk. This risk is the same for both mid cap funds
as well as the small cap funds. Please determine whether this is appropriate and
revise accordingly.
RESPONSE TO COMMENT 7
The market capitalization risk for the small cap funds has been revised in
response to this comment.
COMMENT 8 - PRINCIPAL RISKS
Non-Diversification Risk. Please indicate what risk is involved.
RESPONSE TO COMMENT 8
The prospectus has been revised in response to this comment.
COMMENT 9 - INDEX PROVIDER
The prospectus states, at page 38, that the Fund's distributor, First
Trust Portfolios L.P., has licensed the AlphaDEX(R) stock selection method to
S&P and that S&P has exclusive rights to select stocks included in the Indices.
The prospectus further states that S&P designed the Index to "objectively
identify" and select stocks from the S&P MidCap 400 Growth Index using the
AlphaDEX(R) methodology.
Please provide more information about these arrangements to help us
understand them better, particularly with respect to the following:
(a) the AlphaDEX(R) stock selection methodology, including the
criteria used to "objectively identify" stocks in the S&P MidCap 400
Growth Index to be selected for the Index;
(b) the means and extent of S&P's use of the AlphaDEX(R) method to
develop and maintain the Index; and
(c) the extent to which S&P may be constrained or, alternatively,
freely able to exercise discretion in using the AlphaDEX(R) methodology to
select individual stocks for the Index.
RESPONSE TO COMMENT 9
(a) The prospectus has been revised in response to this comment. For
additional information regarding the AlphaDEX methodology, please refer to the
website
http://www.ftportfolios.com/retail/display.aspx?P=ETFWhatIsAlphadex.
(b) The prospectus has been revised in response to this comment.
(c) The prospectus has been revised in response to this comment. S&P has
no constraints with respect to its exercise of discretion in using the
AlphaDEX(R) methodology to select individual stocks for the Index.
COMMENT 10 - INDEX INFORMATION
Please provide additional details about the S&P MidCap 400 Growth Index,
and the comparable base index for the other Funds, including their creation and
maintenance, as well as the methods used to select stocks, or other securities,
included in the those Indices.
RESPONSE TO COMMENT 10
The prospectus has been revised in response to this comment.
STATEMENT OF ADDITIONAL INFORMATION
COMMENT 11
Please change the statement of concentration policy for each Fund, at page
5, to clarify that the Funds will concentrate in an industry or group of
industries if the Index concentrates in that industry or group of industries and
will not concentrate in any industry if the Index is not so concentrated.
Response to COMMENT 11
The statement of additional information has been revised in response to
this comment.
COMMENT 12
Please add the phrase "during the past 5 years" to the end of the caption
for the column listing other board positions held by trustees in the table at
page 21.
RESPONSE TO COMMENT 12
The statement of additional information has been revised in response to
this comment.
***
TANDY ACKNOWLEDGMENT
In connection with the Trust's registration statement, the Trust
acknowledges that;
o should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
o the action of the Commission or the staff, acting pursuant to delegated
authority in declaring the filing effective, does not relieve the Trust
from its full responsibility for the adequacy and accuracy for the
disclosure in the filing; and
o the Trust may not assert this action as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
Please call me at (312) 845-3484 if you have any questions or issues you
would like to discuss regarding these matters.
Sincerely yours,
CHAPMAN AND CUTLER LLP
By: /s/ Morrison C. Warren
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Morrison C. Warren