A sound investment process and strong management team underpin Fidelity International Value Factor ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in quality exposure and an underweight in liquidity exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And a low liquidity exposure is rooted in stocks with lower trading volumes, limiting managers' flexibility. The strategy’s management team earns an Above Average People Pillar rating. 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

ASML Hld

National Energy Services Reunited

AstraZeneca

Shell PLC

Novan

Autoliv

TotalEnergies SE

Rogers

Banco Santander

Royal Bank of Canada

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 International Value Factor ETF earns a High Process Pillar rating. 

The leading factor in the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Impressive risk-adjusted performance also supports the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 65% supports the rating. 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. Their relatively high success ratio suggests that this firm does well for investors and that this fund may benefit from that.

 This strategy targets larger plays than its peers’ average in the Foreign Large Value Morningstar Category. But in terms of investment style, it is on par with peers. Looking at additional factor exposure, this strategy has consistently had a defensive tilt owing to its exposure to high-quality stocks over the past few years. Though it may trail peers during an economic boom, this orientation contributes to helping it weather periods of economic stress better. In recent months, the strategy was more exposed to the Quality factor compared with its Morningstar Category peers as well. This strategy also has held illiquid stocks, evidenced by holdings' lower trading volume in recent years over peers, resulting in high liquidity risk exposure. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. Similarly, in recent months, the strategy also had less exposure to the Liquidity factor than peers. Additionally, the strategy has demonstrated a contrarian approach with relatively low exposure to momentum stocks during these years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. In recent months, the strategy also had less Momentum 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 by 3.8 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and energy, underweight the average by 2.7 and 2.5 percentage points of assets, respectively. The portfolio is composed of 123 holdings and is similarly diversified as peers, with 16.0% of portfolio assets concentrated within the top 10 holdings. And finally, in terms of portfolio turnover, on a year-over-year basis, 81% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

Fidelity’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There’s a sizable bench of five managers listed on the fund. The team is well equipped, with an average of 11 years of portfolio management experience. Together, they manage a total of 60 strategies, with solid long-term prospects. The strategies average a Gold asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

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 International Value Factor ETF

FIVA tracks a multi-factor index of large- and mid-cap value stocks from developed markets, ex-US.

Fidelity Enhanced International ETF

Fidelity International High Dividend ETF

Is it time to invest abroad? The U.S. stock market remains robust even despite so much hemming and hawing entering 2024.

News for Fidelity International Value Factor ETF ETF (FIVA)