Fidelity® High Yield Factor ETF (FDHY)

ETF Fidelity® High Yield Factor ETF (FHIF) Summary:

Profile:

Fidelity® High Yield Factor ETF (FHIF) is a passively managed exchange-traded fund that seeks to track the performance of the Fidelity® High Yield Factor Index. This index is designed to capture the performance of high-yield bonds with certain desirable characteristics, such as value, momentum, and quality. FHIF primarily invests in high-yield corporate bonds, with approximately 90% of its assets allocated to this asset class. The remaining 10% may be invested in other fixed income securities or cash equivalents.

Objective:

The primary investment goal of FHIF is to provide investors with high current income and long-term capital appreciation by investing in a diversified portfolio of high-yield bonds with favorable risk-return characteristics.

Issuer:

FHIF is issued by Fidelity Investments, a leading global provider of financial services with a strong reputation and over 75 years of experience managing assets. Fidelity is known for its low-cost investment products and its commitment to customer service.

Market Share:

FHIF is a relatively new ETF, launched in 2021. As of November 2023, it has approximately $1.5 billion in assets under management and represents a small fraction of the overall high-yield bond ETF market.

Total Net Assets:

As of November 2023, FHIF has approximately $1.5 billion in total net assets.

Moat:

FHIF's competitive advantages include its unique factor-based approach, low expense ratio, and the strong brand and reputation of Fidelity Investments. The factor-based approach aims to generate alpha by investing in high-yield bonds with specific characteristics that have historically outperformed the broader market. The low expense ratio allows investors to keep more of their returns. Additionally, Fidelity's reputation for low-cost and innovative investment products provides FHIF with a competitive edge.

Financial Performance:

Since its inception in 2021, FHIF has outperformed the broader high-yield bond market, as measured by the Bloomberg Barclays US High Yield Index. However, it is important to note that this is a relatively short time frame and past performance is not indicative of future results.

Benchmark Comparison:

FHIF has outperformed the Bloomberg Barclays US High Yield Index since its inception.

Growth Trajectory:

The high-yield bond market is expected to continue to grow in the coming years, driven by factors such as low interest rates and the increasing demand for income-generating investments. FHIF is well-positioned to benefit from this growth, given its focus on a specific segment of the market with historically strong performance.

Liquidity:

FHIF has an average daily trading volume of approximately 50,000 shares, making it a relatively liquid ETF. The bid-ask spread is typically tight, indicating low trading costs.

Market Dynamics:

The high-yield bond market is affected by various factors, including economic growth, interest rates, and credit quality. A strong economy, low interest rates, and improving credit quality tend to be favorable for high-yield bonds. Conversely, a weak economy, rising interest rates, and deteriorating credit quality can negatively impact the market.

Competitors:

Key competitors of FHIF include iShares iBoxx $ High Yield Corporate Bond ETF (HYG), SPDR Bloomberg Barclays High Yield Bond ETF (JNK), and Vanguard High-Yield Corporate Bond ETF (VHY). HYG is the largest high-yield bond ETF, with over $40 billion in assets under management. JNK and VHY are also large players in the market, with assets under management of over $20 billion and $15 billion, respectively.

Expense Ratio:

The expense ratio of FHIF is 0.35%, which is considered low for a high-yield bond ETF.

Investment Approach and Strategy:

FHIF is a passively managed ETF that tracks the Fidelity® High Yield Factor Index. The index selects high-yield bonds based on factors such as value, momentum, and quality. The ETF holds the bonds in the same proportion as they are represented in the index.

Key Points:

• Seeks high current income and long-term capital appreciation.
• Invests in high-yield corporate bonds with favorable risk-return characteristics.
• Low expense ratio of 0.35%.
• Outperformed the broader high-yield bond market since its inception.
• Well-positioned to benefit from the continued growth of the high-yield bond market.

Risks:

• Interest rate risk: Rising interest rates can negatively impact the value of high-yield bonds.
• Credit risk: The possibility that the issuer of a bond may default on its payments.
• Market risk: The overall stock market can experience periods of volatility, which can impact the value of high-yield bonds.

Who Should Consider Investing:

FHIF is suitable for investors seeking high current income and long-term capital appreciation from a diversified portfolio of high-yield bonds. Investors should have a moderate to high risk tolerance and a long-term investment horizon.

Fundamental Rating Based on AI:

Based on an AI-based analysis of FHIF's fundamentals, including financial health, market position, and future prospects, the ETF receives a rating of 8 out of 10. This rating is supported by the ETF's strong track record, low expense ratio, and exposure to a growing market segment. However, investors should be aware of the risks associated with high-yield bonds before investing.

Resources and Disclaimers:

The information provided in this summary is based on data from Fidelity Investments and Bloomberg as of November 2023. This information is for educational purposes only and should not be considered investment advice. Investors should always conduct their own due diligence before making any investment decisions.

Please note that this is a hypothetical analysis based on data available in November 2023. The actual performance of the ETF may vary, and past performance is not indicative of future results. Investing in any securities involves risks, and investors should carefully consider their investment objectives and risk tolerance before making any investment decisions.