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

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. 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

Alphabet

NVIDIA

Microsoft

Apple

QUALCOMM

Adobe

Advanced Micro Devices

Intel

Equinix

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Fidelity Metaverse 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. The parent firm's five-year risk-adjusted success ratio of 64% also contributes to the process. 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 the firm does well for investors and that this fund may benefit from that. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, contributes to the process as well.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Metaverse IndexSM.  The fund normally invests at least 80% of assets in securities included in the index and in depositary receipts representing securities included in the index. The index is designed to reflect the performance of a global universe of companies that develop, manufacture, distribute, and or sell products or services related to establishing and enabling the Metaverse. The fund is non-diversified. 

 The portfolio is overweight in technology and real estate relative to the category average by 42.1 and 4.7 percentage points, respectively. The sectors with low exposure compared to category peers are communication services and consumer cyclical, underweight the average by 40.6 and 4.5 percentage points of assets, respectively. The strategy owns 63 securities and its assets are more dispersed than peers in the category. In particular, 46.8% of the portfolio's assets are concentrated in the top 10 fund holdings, compared to the category’s 64.0% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 47% of the fund's holdings have changed, 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 a Gold asset-weighted average Morningstar Medalist Rating, indicating the potential 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 Covington Trust-Fidelity Metaverse Etf

FMET tracks a market cap-weighted index of equities that provides global exposure to the future state of the internet: the metaverse.

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In its latest report released last December, the Bureau of Economic Analysis (BEA) estimates that the digital economy now represents 10% of the total U.S. GDP, or $2.6 trillion.  The digital economy is also growing at an average annual growth rate of 7.1%.

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Global internet stocks rallied strongly last week after U.S. inflation figures for October came in slightly lower than expected, signaling a potentially less hawkish Federal Reserve next year.  Following a massive tech sell-off only a few weeks ago on weaker mega-tech earnings, global internet stocks rebounded last week.

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Further cementing the long-term viability of the metaverse investment thesis, high-level executives at some Fortune 500 companies are increasingly eyeing metaverse expenditures. That could be a long-term positive for metaverse-related equities and exchange traded funds such as the Fidelity Metaverse ETF (FMET).

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Amid disappointing performances by growth stocks this year, including plenty of previously beloved names, it's easy for investors to sour on disruptive themes, including the metaverse.

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With growth stocks struggling, now could be an ideal time for risk-tolerant investors to evaluate the opportunity-rich metaverse investment thesis. For those who want to eschew picking individual metaverse stocks, exchange traded funds are an appropriate point of access for this theme.

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Despite the dire headlines over the cryptocurrency market, Fidelity Digital Asset Services LLC is doubling down on its commitment to crypto. The Fidelity Investments subsidiary's president Tom Jessop told the Wall Street Journal that they're looking to hire 110 tech workers, including engineers and developers with blockchain expertise, to build digital infrastructure to support services [.

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With growth and technology stocks flailing this year, it's understandable that investors are wary of assets with the disruptive label and skittish about concepts such as the metaverse. On the other hand, buying low and selling high is the primary goal in investing, and today, market participants have ample opportunity to buy low among metaverse-related [.

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News for Fidelity Covington Trust-Fidelity Metaverse Etf ETF (FMET)