Fidelity Investment Grade Securitized ETF (FSEC)

Fidelity Investment Grade Securitized ETF (FGVT)

Profile

FGVT is an ETF that primarily invests in US dollar-denominated investment-grade structured products, including asset-backed securities (ABS), mortgage-backed securities (MBS), and collateralized loan obligations (CLOs). The ETF seeks to provide investors with a high level of current income and total return, while maintaining a diversified portfolio.

Objective

The primary investment goal of FGVT is to generate income and capital appreciation by investing in a diversified portfolio of US dollar-denominated investment-grade structured products.

Issuer

Fidelity Investments

• Reputation and Reliability: Fidelity Investments is a leading global financial services firm with a strong reputation and track record. It is the largest mutual fund provider in the United States and has been managing assets for over 75 years.
• Management: The ETF is managed by a team of experienced professionals with expertise in structured products and fixed income investments.

Market Share

FGVT is a relatively small ETF within the structured product space. However, it has seen significant growth in recent years.

Total Net Assets

As of October 26, 2023, FGVT had total net assets of approximately $1.2 billion.

Moat

FGVT has a few competitive advantages:

• Experienced Management Team: The ETF benefits from Fidelity's strong investment research and portfolio management capabilities.
• Diversified Portfolio: The ETF's investment strategy aims to mitigate risk through diversification across different types of structured products and issuers.
• Low Expense Ratio: Compared to other similar ETFs, FGVT has a low expense ratio, making it more attractive to cost-conscious investors.

Financial Performance

FGVT has delivered a positive return since its inception in 2015. It has outperformed the Bloomberg Barclays U.S. Universal Index, which tracks the performance of U.S. dollar-denominated investment-grade structured products.

Growth Trajectory

The market for investment-grade structured products is expected to grow in the coming years, driven by factors such as increasing demand for income-generating investments and the ongoing development of new structured product types. This bodes well for FGVT's future growth potential.

Liquidity

FGVT has a relatively high average trading volume, indicating good liquidity.

Market Dynamics

Market factors that can affect FGVT's performance include:

• Interest Rates: Rising interest rates can negatively impact the value of fixed-income investments, including structured products.
• Economic Growth: A strong economy can lead to increased demand for structured products, while a weak economy can have the opposite effect.
• Regulations: Changes in regulations governing structured products can impact the market for these investments.

Competitors

FGVT's key competitors include:

• iShares U.S. Investment Grade ABS/MBS ETF (SLQD)
• SPDR Bloomberg Barclays Investment Grade Bond ETF (LQD)
• Vanguard Mortgage-Backed Securities ETF (VMBS)

Expense Ratio

FGVT has an expense ratio of 0.25%.

Investment Approach and Strategy

• Strategy: FGVT passively tracks the Bloomberg Barclays U.S. Universal Index.
• Composition: The ETF invests in a diversified portfolio of U.S. dollar-denominated investment-grade structured products, including ABS, MBS, and CLOs.

Key Points

• FGVT is a passively managed ETF that invests in investment-grade structured products.
• Its primary goal is to generate income and capital appreciation.
• It is managed by Fidelity Investments, a leading financial services firm with a strong reputation and track record.
• It has a relatively high average trading volume, indicating good liquidity.
• The ETF is subject to various market risks, including interest rate risk, economic risk, and regulatory risk.

Risks

• Volatility: The value of FGVT's holdings can fluctuate significantly due to changes in market interest rates, economic conditions, and other factors.
• Market Risk: The underlying assets in FGVT's portfolio are subject to various risks, such as credit risk, prepayment risk, and liquidity risk.
• Call Risk: Some of the structured products held by FGVT may be callable, meaning that the issuer can redeem them before maturity. This can lead to a decline in the ETF's value if the issuer calls the bonds when interest rates are low.

Who Should Consider Investing

FGVT is suitable for investors:

• Seeking income-generating investments.
• Comfortable with moderate risk.
• Have a long-term investment horizon.

Fundamental Rating Based on AI

7.5 out of 10

FGVT receives a score of 7.5 out of 10 based on an AI-based rating system. This score considers various factors, including financial health, market position, and future prospects. The strengths of the ETF include its strong management team, diversified portfolio, and low expense ratio. However, the ETF is subject to various market risks and may not be suitable for all investors.

Resources and Disclaimers

• Fidelity Investments: https://www.fidelity.com/etfs/product/fgvt/overview
• Bloomberg Barclays U.S. Universal Index: https://www.bloomberg.com/professional/product/barclays-indices/bloomberg-barclays-u-s-universal-index-1344860

Disclaimer: The information provided in this analysis is for informational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making any investment decisions.