Fidelity Real Estate Investment ETF’s Process Pillar rating is Average, but a strong management team still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. The strategy gets an Average Process Pillar rating.  Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low volatility exposure is rooted in stocks that have a lower 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

Prologis

Equinix

SBA Communications

Ventas

Public Storage

Kimco Realty

Crown Castle International

National Retail Properties

Mid-America Apartment Communities

Digital Realty Trust

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 Real Estate Investment ETF earns an Average Process Pillar rating. 

The primary contributor to 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 beat their respective category's median Morningstar Risk-Adjusted Return for the period. The stability of the management team also bolsters the process. Specifically, the fund has not seen a manager change in the last two years. Lastly, the process is limited by the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.

 This strategy tends to hold smaller, more growth-oriented companies than its average peer in the Real Estate Morningstar Category. Looking at additional factor exposure, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also exhibited a tilt toward low-volatility stocks in recent years, meaning companies with a lower historical standard deviation of returns. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. Additionally, the strategy has demonstrated a contrarian approach with relatively low exposure to momentum stocks during these years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. 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 real estate by 3.5 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and financial services; however, the allocations are similar to the category. The portfolio is positioned across 40 holdings and is less top-heavy than peers. Specifically, 55.6% of the fund’s assets are concentrated within the top 10 fund holdings, compared to the category average's 61.5%. And finally, in terms of portfolio turnover, this fund trades more frequently than its average peer, potentially racking up additional expenses for investors and creating a drag on performance.

Average

Process

Fidelity Real Estate Investment ETF earns an Above Average People Pillar rating. The primary 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 beat their respective category's median return for the period. The combined average five-year excess return of each manager also influences the rating. It implies that the funds they manage have beat the average manager. Lastly, the rating is limited by the size of its portfolio management team, only two portfolio managers.


Steven J. Buller, the longest-tenured manager on the strategy, provides strong guidance, offering over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.3 stars, reflecting average risk-adjusted performance relative to category peers. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

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 Real Estate Investment ETF

FPRO is an actively-managed, non-transparent ETF that invests in global real estate companies. The fund utilizes the Fidelity non-transparent model.

Since the COVID lockdowns, one of the pervasive market narratives has been the demise of commercial real estate. With many Americans now working entirely remotely or in hybrid arrangements, offices are much less central to white-collar jobs.

News for Fidelity Real Estate Investment ETF ETF (FPRO)