A strong management team and sound investment process underpin Fidelity Enhanced Large Cap Core ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The longest-tenured portfolio manager's extensive experience drives the strategy's High People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

NVIDIA

Microsoft

Apple

Amazon

Alphabet

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Broadcom

JPMorgan Chase & Co

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Fidelity Enhanced Large Cap Core ETF earns an Above Average Process Pillar rating. 

The main driver of the rating is the parent firm's five-year risk-adjusted success ratio of 66%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also strengthens the process. Lastly, the process is limited by the parent firm's five-year retention rate of 73%, which suggests it could do more to hold onto its portfolio managers.

 This strategy skews toward smaller, deeper value companies compared with its average peer in the Large Blend Morningstar Category. Analyzing additional factors, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, this strategy has taken on exposure to high-momentum stocks in these years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. In this month, the strategy also had more exposure to the Momentum factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in communication services by 2.9 percentage points in terms of assets compared with the category average, and its technology allocation is similar to the category. The sectors with low exposure compared to category peers are real estate and consumer defensive; however, the allocations are similar to the category. The portfolio is positioned across 186 holdings and is less top-heavy than peers. Specifically, 34.9% of the strategy's assets are concentrated within the top 10 fund holdings, as opposed to the category’s 51.0% average.

Above Average

Process

Fidelity Enhanced Large Cap Core ETF earns a High People Pillar rating. The most significant contributor to the rating is its parent firm's five-year success ratio of 64%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The combined average five-year excess return of each manager also supports the rating. It implies that the funds they manage have outperformed the average manager. Management team experience, which averages 19 years at this fund, supports the People rating as well.


None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

High

People

Fidelity earns an Above Average Parent rating because of its ability to stay ahead of its competition.

The firm's successful stock-picking mutual funds fueled its rise to prominence, and it has adapted well to investor preferences that have shifted markedly over the past two decades. Index funds and exchange-traded funds have garnered most of the industry's flows as money has gushed from actively managed products—Fidelity's included. Yet overall, the asset-management division has continued to achieve positive organic growth by introducing or maintaining aggressive pricing on its own suite of passively managed funds and expanding its menu of client-demanded investment structures, such as managed accounts and collective investment trusts. These moves are made possible by the firm's strong distribution network, scale, established brand, and willingness to tolerate losses on some products in pursuit of broader strategic objectives.

The firm is not without blemishes. It could stand to rationalize its lineup of active equity funds and do better to maintain continuity in an equity fund's portfolio construction as the fund's leadership inevitably changes.

Overall, the firm has served its funds' investors well. It boasts a topnotch fixed-income division and remains home to some of the industry's most talented equity managers and a strong team supporting its well-run target-date series.

Parent

Fidelity Enhanced Large Cap Core ETF

FELC is actively managed, investing in large-cap stocks belonging to a broad US equity index. The fund aims for growth of capital.

Fidelity Enhanced Large Cap Growth ETF

Fidelity Enhanced Large Cap Value Etf

Fidelity Enhanced International ETF

Fidelity Enhanced Small Cap Etf

Fidelity Enhanced Mid Cap Etf

A plethora of strategies exist for investors looking for core equity exposure, but investors may want to consider the Fidelity Enhanced ETF equity suite. These ETFs, converted from mutual funds last November, carried over 15 years of trading for the strategies while seeking to outperform their various benchmarks.

The Potential Benefits of Fidelity's Enhanced ETF Core Equity Suite

Active ETFs have leaped forward in prominence over the last several years, with many investors increasing their usage of ETFs as part of their portfolios. With many investors looking for an active equity ETF in a sea of options, FELC, the Fidelity Enhanced Large Cap Core ETF, could stand out.

Consider This Active Equity ETF for Your Portfolio

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FELC: An Ideal Pick For Marginal But Long-Term Alpha Generation

Last year saw active investing take the ETF universe by storm. From the ETF rule's arrival back in 2019 to a growing trend of mutual fund conversions, active ETFs have gained significant interest with their goal to navigate volatility and seek outperformance.

Beyond Index Investing – Seeking Enhanced Outcomes Through Large Cap ETF FELC

Fidelity Investments' leaders joined VettaFi's head of research, Todd Rosenbluth, on a recent webcast to discuss the firm's conversion of several existing strategies from mutual funds to ETFs. The conversions saw six of Fidelity Investments' enhanced equity strategies become ETFs, like the Fidelity Enhanced Large Cap Core ETF (FELC).

Fidelity Leaders Talk Non-Traditional Factors, Active

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ETF 360: Fidelity Enters the Ring With Enhanced ETFs

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News for Fidelity Enhanced Large Cap Core ETF ETF (FELC)