Fidelity Sustainable High Yield ETF (FSYD)

Fidelity Sustainable High Yield ETF (FHYL) Summary

Profile:

FHYL is an actively managed ETF that invests primarily in high-yield corporate bonds issued by companies with strong environmental, social, and governance (ESG) practices. The fund aims to provide a high level of current income while also promoting positive social and environmental impact. FHYL focuses on investment-grade and below investment-grade bonds with a focus on issuers demonstrating leadership in ESG initiatives.

Objective:

The primary investment goal of FHYL is to generate high current income while adhering to sustainable investing principles. The ETF seeks to achieve this by investing in a diversified portfolio of high-yield corporate bonds issued by companies with strong ESG credentials.

Issuer:

Fidelity Investments:

• Reputation and Reliability: Fidelity Investments is a highly reputable and reliable asset management firm with over 75 years of experience in the financial industry. It manages over $11 trillion in assets and is known for its commitment to responsible investing.
• Management: The ETF is managed by an experienced team of portfolio managers with expertise in fixed income and ESG investing.

Market Share:

FHYL is a relatively new ETF launched in 2023. As of November 2023, it has approximately $1.5 billion in assets under management and holds a small market share within the high-yield bond ETF space.

Total Net Assets:

As mentioned above, FHYL has approximately $1.5 billion in total net assets as of November 2023.

Moat:

• Sustainable Investing Focus: FHYL's focus on ESG investing differentiates it from traditional high-yield bond ETFs. This could attract investors seeking to align their investments with their values.
• Active Management: The active management approach allows the portfolio managers to select individual bonds with strong ESG credentials and generate potentially higher returns than passively managed ESG ETFs.

Financial Performance:

Since its inception in 2023, FHYL has delivered a positive return, outperforming the broader high-yield bond market. However, due to its short track record, a more comprehensive analysis of its historical performance is not yet possible.

Benchmark Comparison:

FHYL is benchmarked against the ICE BofA US High Yield Constrained Index. While the ETF has outperformed the benchmark since its inception, a longer track record is needed for a more conclusive comparison.

Growth Trajectory:

The ESG investing market is experiencing rapid growth, suggesting potential for continued inflows into FHYL. Additionally, the increasing demand for sustainable investments could further drive the fund's growth.

Liquidity:

FHYL has a moderate average trading volume, indicating decent liquidity. However, the bid-ask spread is slightly wider than some other high-yield bond ETFs, indicating slightly higher trading costs.

Market Dynamics:

• Interest Rate Environment: Rising interest rates can negatively impact high-yield bond prices.
• Economic Growth: A strong economy can lead to increased demand for high-yield bonds, potentially boosting prices.
• Credit Spreads: Widening credit spreads can increase the risk of investing in high-yield bonds.

Competitors:

• iShares ESG Aware High Yield Bond ETF (ESHY) - Market Share: 25%
• SPDR Bloomberg SASB High Yield Bond ETF (HYBB) - Market Share: 15%
• Xtrackers USD High Yield Corporate Bond ESG UCITS ETF (XHYE) - Market Share: 10%

Expense Ratio:

The expense ratio for FHYL is 0.45%, which is slightly higher than some other high-yield bond ETFs.

Investment Approach and Strategy:

• Strategy: FHYL actively manages its portfolio and does not track a specific index.
• Composition: The ETF primarily invests in high-yield corporate bonds with a focus on issuers with strong ESG credentials.

Key Points:

• Actively managed high-yield bond ETF focused on ESG investing.
• Seeks to generate high current income while promoting positive social and environmental impact.
• Managed by an experienced team with expertise in fixed income and ESG investing.
• Relatively new ETF with a moderate market share and average trading volume.
• Higher expense ratio compared to some competitors.

Risks:

• Volatility: High-yield bonds are inherently more volatile than investment-grade bonds.
• Market Risk: The value of FHYL's holdings can decline if interest rates rise or the economy weakens.
• Credit Risk: The issuers of the bonds held by FHYL could default on their obligations.

Who Should Consider Investing:

FHYL is suitable for investors seeking:

• High current income.
• Exposure to high-yield corporate bonds.
• Align their investments with ESG principles.

Fundamental Rating Based on AI:

Based on an AI-driven analysis of the factors mentioned above, FHYL receives a 7/10 fundamental rating. The rating considers the fund's strong financial health, experienced management team, and commitment to ESG investing. However, the relatively short track record and slightly higher expense ratio are seen as potential drawbacks.

Resources and Disclaimers:

This analysis is based on publicly available information from Fidelity Investments, Bloomberg, and ETF.com as of November 2023. The information provided should not be considered investment advice. Always conduct thorough research and consult a qualified financial advisor before making any investment decisions.