Fidelity to Launch its First Suite of Factor-Based ETFs

Six New Factor ETFs Leverage Fidelity's Extensive Fundamental and Quantitative Research Capabilities; With New ETFs, Customers Will Have Access to 91 Commission-Free1 ETFs

BOSTON — Fidelity Investments, one of the industry's leading providers of exchange traded funds (ETFs) with more than $250 billion in ETF assets under administration2, today announced it will expand its lineup of ETFs for individual investors and financial advisors with the introduction of the company’s first suite of factor-based ETFs.

Fidelity's six new factor-based ETFs — Fidelity Core Dividend ETF (FDVV), Fidelity Dividend ETF for Rising Rates (FDRR), Fidelity Low Volatility Factor ETF (FDLO), Fidelity Momentum Factor ETF (FDMO), Fidelity Quality Factor ETF (FQAL), and Fidelity Value Factor ETF (FVAL) — will commence trading on the New York Stock Exchange on or about Thursday, September 15. Each of the new ETFs will be competitively priced with total expense ratios of just 0.29%. In addition, individual investors and advisors will be able to purchase each of the new ETFs commission-free3 online through one of Fidelity's brokerage platforms.

"Fidelity has been executing on its ETF strategy for some time, and our success can be seen in the one quarter of a trillion dollars in ETF assets under administration that customers have entrusted to us, representing about 11% of all U.S.-domiciled ETF assets,"4 said Anthony Rochte, president of SelectCo, the company's dedicated sector investing and ETF services division. "Launching the six factor-based ETFs reinforces our commitment to expanding Fidelity's ETF investment manufacturing capabilities, while delivering an exceptional customer experience that is centered on providing choice, value and expertise."

Once the six new factor-based ETFs are launched, customers will have access to 91 commission-free ETFs, including three Fidelity actively-managed bond ETFs, 11 Fidelity passive equity sector ETFs, Fidelity ONEQ, and 70 passive iShares ETFs.

New Factor ETFs Leverage Fidelity’s Extensive Investment Research Capabilities

Investment factors — such as size, value, momentum, quality, and low volatility — are at the core of "smart" or "strategic" beta strategies, and are investment characteristics that can enhance portfolios over time. And like traditional ETFs, factor-based ETFs can be used to build a well-diversified portfolio as well as potentially help improve returns and manage risk over time. Fidelity's six new ETFs, which will track proprietary indices, combine the company's legacy of fundamental research with factor-based insights by our team of quantitative research analysts, while also leveraging Fidelity's expertise and scale in managing index-based portfolios that are designed to provide customers with an outcome-oriented portfolio diversifier using a rules-based approach.

"Factor-based investing is one of the fastest growing areas of the ETF industry and an area where we believe our proven research capabilities and experience can add value for our customers,” said Joe DeSantis, chief investment officer in Fidelity's Equity division. "For nearly a decade, Fidelity's quantitative research team has been working collaboratively with our portfolio managers and fundamental analysts to develop factor models that incorporate what we believe are the best stock drivers from both fundamental and quantitative perspectives. We are now making this expertise available directly to our customers through our new ETFs. "

With more than $250 billion in net inflows5 over the past five years, factor-based or "smart beta" ETFs now represent approximately $487 billion6 of the $2.3 trillion U.S. ETF market7. Of the more than $250 billion in ETF assets under administration on Fidelity's platform, approximately $62 billion are in factor-based ETFs.

Fidelity Factor-based ETFs Investment Objectives and Index Definitions

  • Fidelity Core Dividend ETF (FDVV) will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Core Dividend Index. The Fidelity Core Dividend Index is designed to reflect the performance of stocks of large- and mid-cap dividend-paying companies that are expected to continue to pay and grow their dividends. The index consists of stocks of companies with historically high dividend yields, low dividend payout ratios and high dividend growth.
  • Fidelity Dividend ETF for Rising Rates (FDRR) will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Dividend Index for Rising Rates. The Fidelity Dividend Index for Rising Rates is designed to reflect the performance of stocks of large- and mid-cap dividend-paying companies that are expected to continue to pay and grow their dividends and have a positive correlation of returns to increasing 10-year U.S. Treasury yields. The index consists of stocks of companies with historically high dividend yields, low dividend payout ratios, high dividend growth, and a positive correlation of returns to increasing 10-year U.S. Treasury bond yields.
  • Fidelity Low Volatility Factor ETF (FDLO) will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity U.S. Low Volatility Factor Index. The Fidelity U.S. Low Volatility Factor Index is designed to reflect the performance of stocks of large- and mid-cap U.S. companies with lower volatility than the broader market. The index consists of stocks of companies with historically low volatility of returns, low beta (a measure of market sensitivity) and low earnings volatility.
  • Fidelity Momentum Factor ETF (FDMO) will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity U.S. Momentum Factor Index. The Fidelity U.S. Momentum Factor Index is designed to reflect the performance of stocks of large- and mid-cap U.S. companies exhibiting positive momentum signals. The index consists of stocks of companies with historically high total and volatility-adjusted returns, high positive earnings surprises and low average short interest.
  • Fidelity Quality Factor ETF (FQAL) will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity U.S. Quality Factor Index. The Fidelity U.S. Quality Factor Index is designed to reflect the performance of stocks of large- and mid-cap U.S. companies with a higher quality profile than the broader market. The index consists of stocks of companies with historically high free–cash-flow margins, high returns on invested capital and high-free-cash flow stability.
  • Fidelity Value Factor ETF (FVAL) will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity U.S. Value Factor Index. The Fidelity U.S. Value Factor Index is designed to reflect the performance of stocks of large- and mid-cap U.S. companies that have attractive valuations. The index consists of stocks of companies with historically high free-cash-flow yields, low enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization), low price to tangible book value and low price to future earnings.

"Factor investing is an effective way to help clients to obtain various exposures or to implement particular strategies," said DeSantis. "One potential strategy might be limiting volatility in a portfolio or seeking out-performance over time."

Fidelity Expands Factor and ETF Educational Resources

Fidelity is making it easier for investors and advisors to learn more about the growing field of factor-based investing through three new Fidelity research papers. The new papers include:

Fidelity also will be hosting two Educational Workshop sessions on ETFs and factor investing on September 22nd. Individuals can register at https://www.fidelity.com/learning-center/events/educational-workshop.

Fidelity's customers also can find in-depth investment insights, research, education and a highly customizable screener for finding ETFs and other exchange traded products (ETPs) at the ETF landing zone (www.fidelity.com/etfs) on Fidelity.com.

About Fidelity Investments

Fidelity's goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.6 trillion, including managed assets of $2.1 trillion as of July 31, 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients' money. Privately held for nearly 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

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