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

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective approach earns an Above Average Process 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.

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Morningstar's style-agnostic investment process evaluation looks for strategies that should be able to outperform their Morningstar Category index on a risk-adjusted basis over time. Fidelity Sustainable High Yield ETF earns an Above Average Process Pillar rating.    The most important driver of the rating is the parent firm's five-year risk-adjusted success ratio of 64%. 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 experience of the management team, which averages three years at this fund.

 The investment strategy as stated in the fund's prospectus is as follows: 


The investment seeks a high level of income.  Normally the fund invests at least 80% of its assets in debt securities rated below investment grade (also referred to as high yield debt securities or junk bonds) of issuers that Fidelity Management & Research Company LLC (FMR or Adviser) believes have proven or improving sustainability practices based on an evaluation of such issuers' individual environmental and social and governance (ESG) profile.

 This strategy has a 6.7% 12-month yield, higher than its average peer's 6.4%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 7.1%. Typically, higher yields come at the cost of higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated B.

Above Average

Process

Fidelity Sustainable High Yield ETF earns an Above Average People Pillar rating. The strategy is backed by Michael Cheng, the longest-tenured manager, who has been a listed portfolio manager for six years. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, reflecting average risk-adjusted performance in comparison to category peers. The team is small, with only three other supporting listed managers, and inadequately equipped. Together, the three only have an average of three years of listed portfolio management experience.  The team's personal investments in the fund are negligible, with the maximum investment by any one manager being between $10,000 and $50,000. That amount is too small to help align managers' interests with the fund's investors. The team has struggled to retain portfolio-management talent, detracting from its rating. The most recent documented departure was two months ago. High team turnover can hinder the effectiveness of a strategy's investment process.

 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

Fidelity Sustainable High Yield ETF

FSYD is an actively managed fund that combines a multi-factor quantitative screen, fundamental analysis, and ESG rating to select high-yield bonds issued by global corporations that exhibit sustainability practices.

Fidelity Investments today announced the launch of a new environmental, social, and governance ETF along with three new ESG-focused mutual funds. The Fidelity Sustainable High Yield ETF (NYSE Arca: FSYD), which begins trading on the NYSE today, normally invests at least 80% of the fund's assets in debt securities rated below investment-grade (also referred to [.

Fidelity Launches New ESG ETF Along With 3 ESG Mutual Funds

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