A sound investment process and strong management team underpin Fidelity MSCI Real Estate ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable 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 underweight position in quality exposure and an overweight in yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. 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

Prologis

American Tower

Equinix

Welltower

Simon Property Group

Realty Income Corp

Digital Realty Trust

Public Storage

Crown Castle International

CoStar Group

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 MSCI Real Estate ETF earns a High Process Pillar rating. The leading factor in the rating is that this fund tracks an index. Historical data, such as 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 bolsters 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 impressive success ratio suggests that the firm does well for investors and that this fund may benefit from that. Respectable risk-adjusted performance also supports the rating, as shown by the fund's five-year alpha calculated relative to the category index, which suggests the process was successful over that period.

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 MSCI USA IMI Real Estate 25/25 Index.  The fund invests at least 80% of assets in securities included in the fund's underlying index. The fund's underlying index is the MSCI USA IMI Real Estate 25/25 Index, and which represents the performance of the real estate sector in the U.S. equity market. It may or may not hold all of the securities in the MSCI USA IMI Real Estate 25/25 Index. 

 The portfolio has allocations in its top two sectors, real estate and communication services, that are 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 151 holdings and is diversified among those holdings. In its most recent portfolio, 45.4% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category average's 59.9%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 9% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Fidelity MSCI Real Estate ETF benefits considerably from its team, earning it an Above Average People Pillar rating. There are three managers listed on the fund: Paul Whitehead, Jennifer Hsui, Peter Sietsema. Experience on the team is abundant, with 13 years of average portfolio management experience. Together, they manage a total of 29 strategies, with solid long-term prospects. The strategies average a Silver 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 MSCI Real Estate ETF

FREL tracks a cap-weighted index of US REIT and real estate companies across the entire market-cap spectrum.

JPMorgan BetaBuilders MSCI US REIT ETF

Invesco S&P 500 Equal Weight Real Estate ETF

First Trust S&P REIT Index Fund

iShares Cohen & Steers REIT ETF

Pacer Benchmark Industrial Real Estate SCTR ETF

iShares U.S. Real Estate ETF

Invesco KBW Premium Yield Equity REIT ETF

VanEck Mortgage REIT Income ETF

NETLease Corporate Real Estate ETF

Nuveen Short-Term REIT ETF

US Diversified Real Estate ETF

Invesco Active US Real Estate

ProShares Short Real Estate

iShares Mortgage Real Estate ETF

iShares Residential Real Estate ETF

IQ US Real Estate Small Cap ETF

SPDR Dow Jones REIT ETF

Schwab U.S. REIT ETF

Global X SuperDividend REIT ETF

Pacer Funds Trust-Pacer Benchmark Data & Infrastructure Real Estate Sector ETF

iShares Core U.S. REIT ETF

Vanguard Real Estate ETF

Virtus Real Asset Income ETF

Real Estate Select Sector SPDR Fund

This article is reprinted by permission from The Escape Home , a newsletter for second homeowners and those who want to be. Subscribe here.

The Escape Home: Here's what real estate agents say to expect about the market in 2022

Direxion Daily Real Estate Bull 3x Shares

Direxion Daily Real Estate Bear 3x Shares

Nuveen Real Estate Income Fund

Neuberger Berman Real Estate Securities Income Fund Inc

Cohen And Steers Total Return Realty Fund

Cohen & Steers Reit And Preferred Income Fund Inc

Cohen & Steers Quality Income Realty Fund

Seven Hills Realty Trust

ProShares UltraShort Real Estate

ProShares Ultra Real Estate

In the January 2022 REIT Outlook, we assess 2021's historical calendar year total return as compared to our initial 2021 forecast, as well as provide our 2022 forecast. We were too conservative on our growth and multiple assumptions for 2021, though our bullish top end of the forecast at +19% was the highest we observed among our peers. For 2022, we expect total returns to be positive, though muted compared to 2021.

2022 Chilton REIT Forecast

Brunswick

Cavco Industries

Camping World Hlds

Equity LifeStyle Properties

MarineMax

LCI Industries

Malibu Boats

MCBC Hlds

Patrick Industries

Manufactured Housing REITs - the best-performing property sector of the past decade – continued their stellar performance in 2021, riding favorable fundamentals of robust rent growth and limited housing supply. MH REITs edged out the REIT Index on the final day of 2021 to push their remarkable streak of outperformance to nine years, the longest of the Modern REIT Era.

Manufactured Housing REITs: Don't Mess With The Best

Airbnb

Apple Hospitality REIT

Blackstone Group

Condor Hospitality Trust

Choice Hotels Int.

CorePoint Lodging Inc

Hyatt Hotels

Hilton Worldwide Holdings

Host Hotels & Resorts

Marriott

Pebblebrook Hotel Trust

Park Hotels & Resorts

It's been a 'Tale of Two Americas' of late for the hotel industry. Several markets and categories continue to report severely depressed demand while others are seeing record-high occupancy rates.

Hotel REITs: Unfazed By Omicron

Charter Communications

Comcast

DigitalBridge Group

DISH Network

SBA Communications

Cell Tower REITs have been one of the primary 'growth engines' of the REIT sector, but are poised to snap their six-year streak of outperformance over the REIT Index this year. The recent slump began around mid-year as several risk factors emerged including potential competition from Low-Earth-Orbit satellite networks and delays in 5G deployment over airline interference concerns.

Cell Tower REITs: Living On The Edge

American Fin Tr Inc - Ordinary Shares - Class A

Preferred Apartment Communities

Bluerock Residential Growth REIT

BrightSpire Capital

BRT Apartments

New Residential Investment

U.S. equity markets rebounded to fresh record-highs heading into the Christmas holiday after governments in the U.S. and U.K. showed restraint in instituting more severe economic restrictions amid the recent COVID reacceleration. Bouncing back from an Omicron-driven sell-off and ending the week at fresh record highs, the S&P 500 rallied 2.3% on the week while Mid-Caps and Small-Caps each gained nearly 3%.

The Gift That Keeps On Giving

Hoya Capital Housing ETF

iShares U.S. Home Construction ETF

Invesco Real Assets ESG ETF

Janus Henderson U.S. Real Estate ETF

Direxion Daily Homebuilders & Supplies Bull 3X Shares

Janus Detr Strt Shs Long-Term Care

Invesco Dynamic Building & Construction ETF

iShares Global REIT ETF

ALPS Active REIT ETF

SPDR S&P Homebuilders ETF

Total housing starts rose to a 1.679 million annual rate in November from a 1.502 million pace in October, an 11.8 percent increase. Starts of multifamily structures with five or more units increased 12.1 percent to 491,000 and are up a robust 39.1 percent over the past year while starts for the two- to four-family-unit segment were up 50.0 percent at a 15,000-unit pace versus 10,000 in October.

Housing Construction Performed Well In November

Agree Realty

American Fin Tr Inc - 7.50% PRF PERPETUAL USD 25 - Ser A

EPR Properties

Four Corners Property Trust

Global Net Lease

Getty Realty

National Retail Properties

One Liberty Properties

Alpine Income Property Trust

Despite a wave of dividend hikes and robust external growth, net lease REITs have been among the weakest-performing property sectors this year amid concerns over soaring inflation and rising interest rates. Despite their reputation as bond substitutes, net lease REITs have historically delivered above-average earnings growth as accretive external growth has more than offset the drag from muted property-level growth.

Net Lease REITs: Analyzing Inflation Risk

Alpine Global Premier Properties Fund

Cambria Global Real Estate ETF

Beazer Homes USA

Century Communities

CatchMark Timber Trust

Invesco MSCI Global Timber ETF

D.R. Horton

WisdomTree Global ex-US Real Estate Fund

First Trust FTSE EPRA/NAREIT Developed Markets Real Estate

FlexShares Global Quality Real Estate Index Fund

Xtrackers International Real Estate ETF

Hovnanian Enterprises

Hovnanian Enterprises, Inc. Pfd Shs Series A

iShares International Developed Real Estate ETF

CBRE Global Real Estate Income Fund

KB Home

Across the land, there are few better inflation hedges than land itself. Timber REITs own nearly 30 million acres of land, more acreage than the smallest U.S. five states combined. Truly an "organic growth" sector, Timber REITs - which were initially slammed at the outside of the pandemic - have come roaring back to life over the last twelve months.

Timber REITs: Renewable Dividends

CoreCivic

GEO Group

Farewell - or perhaps good riddance - to the Prison REIT sector. GEO Group announced last week that it's joining CoreCivic in abandoning the REIT structure, concluding a tumultuous 8-year run as REITs. Prison REITs were the worst-performing property sector since their REIT conversions in 2013 and consistently ranked at the bottom across performance metrics - particularly after their once-lucrative dividends were eliminated.

Prison REITs: The Verdict Is In

Aurora Cannabis

AFC Gamma

Agrify

Arena Pharmaceuticals

Canopy Growth

Clever Leaves Holdings

Amplify Seymour Cannabis ETF

Cardiol Therapeutics

Cronos Group

Direxion Daily CSI China Internet Index Bull 2X Shares

Greenlane Holdings

GrowGeneration Corp

High Tide

Hydrofarm Holdings Group

High on Growth: Cannabis REITs are far-and-away the best-performing REIT sector of the past half-decade as the budding industry thrives in the murky and often contradictory regulatory framework of legalized marijuana. Joining Innovative Industrial, Power REIT, and AFC Gamma, a pair of newcomers will soon enter the pot party - Chicago Atlantic Real Estate Finance and Freehold Properties - both operating as mortgage REITs.

Cannabis REITs: When They Go Low, We Get High

Acadia Realty Trust

Saul Centers

Brixmor Property Group

Cedar Realty Trust

Federal Realty Investment Trust

InvenTrust Properties Corp

Kimco Realty

Kite Realty Group

Macerich

Bouncing back from punishing pandemic-related declines, Shopping Center REITs are on the cusp of a full recovery across all critical metrics but Omicron introduces fresh uncertainty and also potential opportunity. The retail landscape has improved dramatically this year. Retail sales are on-pace to rise over 15% this year while store closings are on pace for the lowest level in a decade.

Shopping Center REITs: Bargain Hunting

Angel Oak Mortgage

Boston Properties

CyrusOne

CubeSmart

MGM Growth Properties

Phillips Edison & Co Inc

In our "State of the REIT Sector" report, we analyze recently-released NAREIT T-Tracker data to review high-level REIT fundamentals over the past quarter through a series of charts. REITs are no longer cheap, but premium valuations have revived the "animal spirits" and sparked a much-needed wave of M&A and IPO activity which has facilitated accretive external growth.

REITs Are No Longer Cheap

Americold Realty

EastGroup Properties

Equity Commonwealth

Industrial Logistics Properties

Rexford Industrial Realty

Out of Stock: The red-hot industrial property market - "ground zero" of supply-chain shortages - continues to ride a historic demand-supply imbalance as businesses scramble to build out supply resiliency. Industrial REITs - which recorded the strongest dividend and FFO growth of any real estate sector in 2020 - continue to thrive amid "extreme competition" for logistics and distribution space.

Industrial REITs: Empty Shelves, Ample Opportunity

Cyxtera Technologies

Iron Mountain

Landmark Infrastructure Partners

The Data Center REIT sector has been substantially and rapidly transformed as the three largest data center portfolio acquisitions in history have been announced in just the past several months. We predicted an impending M&A boom but expected Digital Realty and Equinix to scoop up their smaller peers. Instead, CyrusOne and QTS have been taken private while American Tower acquired CoreSite.

Data Center REITs: Merger Madness

AvalonBay Communities

Centerspace REIT

Equity Residential

Essex Property Trust

Independence Realty Trust

Mid-America Apartment Communities

NexPoint Residential Trust

Renters across the nation should prepare for a rude surprise. Residential rents continue to soar at the fastest pace on record with double-digit percentage increases on both new leases and renewals. Riding this rental growth surge, Apartment REITs - which lagged early in the pandemic - have soared more than 50% this year with widespread strength across both Sunbelt-focused and Coastal-focused REITs.

Apartment REITs: Shelter From Soaring Inflation

News for Fidelity MSCI Real Estate ETF ETF (FREL)