Fidelity Launches Multi-Factor ETF for Often-Overlooked MidCap Equities
This article was originally published on ETFTrends.com.
Fidelity Investments, one of the industry’s leading providers of exchange traded funds (ETFs) with more than $380 billion in ETF assets under administration, today announced an expansion of its ETF lineup with the introduction of the Fidelity Small-Mid Factor ETF (FSMD) .
FSMD will focus on mid-cap equities, which comparatively, are often overlooked relative to their large-cap brethren. Furthermore, mid-cap equities can also tune out some of the volatility experienced by their small-cap brethren.
Investors looking at large-cap stock positions may want more aggressive returns with better growth prospects without the inherent volatility of small cap stocks. Mid-caps strike this perfect balance of performance, diversity and safety.
FSMD offers investors competitive pricing with a total expense ratio of just 0.29%. FSMD will begin trading Thursday on the New York Stock Exchange and will be available to individual investors or financial advisors for purchase commission-free through Fidelity’s online brokerage platforms.
FSMD will apply Fidelity’s in-house quantitative analysis and proprietary risk management to seek differentiated sources of return to help drive better portfolio outcomes. FSMD applies Fidelity’s multifactor approach to both small and mid-cap stocks -- a unique universe that has historically provided better exposure to the size factor than investing in only small-caps.
Investment Objectives and Index Definitions of FSMD:
Fidelity Small-Mid Factor ETF (FSMD) seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Small-Mid Factor Index.
The fund will normally invest at least 80% of its assets in securities included in the index. The Fidelity Small-Mid Factor Index is designed to reflect the performance of stocks of small- and mid-capitalization U.S. companies with attractive valuations, high quality profiles, positive momentum signals, and lower volatility than the broader market, as represented by Fidelity U.S. Extended Investable Market Index. T
his index is a subset of the Fidelity U.S. Total Investable Market Index, but excludes the 500 largest companies included in the broader index.
In addition to FSMD, Fidelity also launched the Fidelity Targeted International Factor ETF (FDEV) and Fidelity Targeted Emerging Markets Factor ETF (FDEM) for factor-based exposure overseas. FDEV and FDEM both leverage Fidelity’s unique multifactor methodology and also target securities least correlated with the performance of the S&P 500 at a competitive price.
“The three new factor ETFs are available commission-free and competitively priced below the industry average,” says Greg Friedman, Fidelity’s head of ETF management and strategy. “When you combine the expense ratio with access to Fidelity’s research, tools, trade execution, and product offering, we believe there is no better value in the industry.”
By adding these new products to the Fidelity ETF line-up, investors now have access to a competitively priced suite of 13 factor ETFs, three actively-managed bond ETFs, 11 passive equity sector ETFs, and Fidelity ONEQ, all available for purchase commission–free on Fidelity’s ETF platform. As announced earlier this month, Fidelity is in the process of expanding its commission-free ETF platform for individual investors and advisors to include more than 500 ETFs.
Effective today, more than 300 iShares ETFs are available for online purchases commission-free. This is the first phase of the platform’s expansion, with additional high-quality ETFs to be added in the coming months.
“We have leveraged years of experience in both quantitative and fundamental research to develop our unique approach in constructing our entire factor ETF suite, including these three new funds,” says Friedman. “Our in-house quantitative analysis team conducts comprehensive factor research and leverages our active management processes to design ETFs with investor outcomes in mind.”
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