Fidelity® Fundamental Large Cap Gr ETF's recent fee cut and Process Pillar rating increase lead to an upgrade in this strategy's Morningstar Medalist Rating to Silver from Bronze. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating.  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. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Microsoft

NVIDIA

Amazon

Apple

Alphabet

Eli Lilly

Uber

Mastercard

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® Fundamental Large Cap Gr ETF earns an Above Average Process Pillar rating. 

The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 65%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent firm's impressive risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also influences the rating. Lastly, the process is limited by the parent firm's five-year retention rate of 72%, which suggests it could do more to retain its portfolio managers.

 This strategy tends to hold smaller, higher-growth companies than its average peer in the Large Growth Morningstar Category. Looking at additional factor exposure, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, the portfolio has tended to underweight yield, as shown in its lower exposure to companies that pay dividends or buy back shares than peers over these years. This is demonstrated by the portfolio's low exposure to dividends or buybacks. While companies with high yields provide steady income payments, they may cut payouts if their earnings decline. In recent months, the strategy also had less Yield factor exposure than 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 technology and communication services relative to the category average by 8.9 and 3.1 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and healthcare, underweight the average by 5.1 and 2.7 percentage points of assets, respectively. The portfolio is positioned across 88 holdings and is relatively concentrated. In particular, 56.5% of the strategy's assets are housed within the top 10 holdings, compared with the category’s 53.2% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 78% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Fidelity® Fundamental Large Cap Gr ETF earns an Above Average People Pillar rating. Michael J Kim, the longest-tenured manager, has six years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 1.9 stars, demonstrating underwhelming risk-adjusted performance. Michael J Kim has an experienced backdrop of support. The three listed managers boast 11 years of average listed portfolio management experience.  The team's personal investments in the fund are negligible, with the maximum investment by any one manager being between $50,000 and $100,000. That amount is too small to help align managers' interests with the fund's investors. 

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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

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