BOSTON — Fidelity Investments®, one of the industry's leading providers of exchange traded funds (ETFs) with more than $380 billion in ETF assets under administration,2 today announced an expansion of its ETF lineup with the introduction of two factor ETFs: Fidelity Low Duration Bond Factor ETF (FLDR) and Fidelity High Yield Factor ETF (FDHY).
The new ETFs are competitively priced with total expense ratios of just 0.15% for FLDR and 0.45% for FDHY. Both ETFs began trading today, the Fidelity Low Duration Bond Factor ETF on the CBOE BZX Exchange, Inc. and Fidelity High Yield Factor ETF on the New York Stock Exchange. They are available to individual investors and financial advisors commission-free3 through Fidelity's online brokerage platforms. These new fixed income and high income factor ETFs apply Fidelity's quantitative analysis and proprietary risk management to seek sources of income to help drive better portfolio outcomes. Fidelity currently manages more than $1.13 trillion in fixed income and high income assets backed by more than 261 investment professionals worldwide.4
"With a quantitative, rules-based methodology at its core and an active liquidity overlay, Fidelity High Yield Factor ETF leverages our extensive high income capabilities to offer an enhanced exposure to the high yield market for ETF investors," said Greg Friedman, head of ETF management and strategy at Fidelity. "Fidelity Low Duration Bond Factor ETF is unique in its category because it seeks a balance between credit risk and interest rate risk, on top of pursuing higher income potential than a money market with lower volatility than a short-term bond fund."
With the addition of these two ETFs, investors now have access to 95 commission-free3 ETFs, including the full suite of 10 factor ETFs, three Fidelity actively-managed bond ETFs, 11 Fidelity passive equity sector ETFs, Fidelity ONEQ, and 70 passive iShares ETFs. Fidelity's commission-free3 ETF lineup continues to see tremendous asset growth, with $111 billion in AUA.5
Fidelity's New Fixed Income ETFs: Investment Objectives and Index Definitions
- Fidelity High Yield Factor ETF (FDHY) seeks to provide a high level of income and may also seek capital appreciation by normally investing at least 80% of its assets in debt securities rated below investment grade. In buying and selling securities, the fund uses a proprietary multifactor quantitative model to systematically screen over 1,000 bonds and select those with strong return potential and low probability of default using a value and quality factor-based methodology. The fund uses the ICE BofAML BB-B US High Yield Constrained Index 6 as a guide in structuring the fund and selecting its investments as it relates to credit quality distribution and risk characteristics. The fund also employs active security selection to optimize trading and reduce transaction costs.
- Fidelity Low Duration Bond Factor ETF (FLDR) will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Low Duration Investment Grade Factor Index. The fund will normally invest at least 80% of its assets in securities included in the index. The Fidelity Low Duration Investment Grade Factor Index , which is comprised of U.S. investment grade floating rate notes with less than 5 years maturity and U.S. Treasury notes with 7 to 10 years maturity, is designed to optimize the balance of interest rate risk and credit risk, such that both returns and risk measures may be improved relative to traditional U.S. investment grade floating rate note indices.
New ETFs Expand Fidelity's Fixed Income and High Income Offerings
These new factor ETFs complement Fidelity's broader fixed income and high income offerings, including Fidelity's actively-managed fixed income and high income mutual funds and actively-managed fixed income ETFs. In April, Fidelity lowered the net expense ratios on its three actively-managed fixed income ETFs from .45% to .36%.
"Our three active fixed income ETFs were already very competitively priced compared to other actively managed fixed income ETFs that invest primarily in U.S. investment-grade taxable bonds," says Friedman. "With these price reductions, they are even more compelling."
The three actively-managed fixed income ETFs were launched in October 2014 to meet client demand for funds with active fixed income management, while offering the trading flexibility and transparency of an ETF. The three ETFs include:
- Fidelity Total Bond ETF (FBND), which seeks a high level of current income. The fund normally invests at least 80% of its assets in debt securities of all types and repurchase agreements for those securities;
- Fidelity Limited Term Bond ETF (FLTB), which seeks a high rate of income. The fund normally invests at least 80% of its assets in investment-grade debt securities of all types and repurchase agreements for those securities; and
- Fidelity Corporate Bond ETF (FCOR), which seeks a high level of current income. The fund normally invests at least 80% of assets in investment-grade corporate bonds and other corporate debt securities and repurchase agreements for those securities.
Fidelity Provides Factor and ETF Educational Resources
Fidelity research on factor investing includes "An Overview of Factor Investing" and "Putting Factors to Work." Fidelity's customers 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 mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $6.9 trillion, including managed assets of $2.5 trillion as of April 30, 2018, we focus on meeting the unique needs of a diverse set of customers: helping more than 27 million people invest their own life savings, 23,000 businesses manage employee benefit programs, as well as providing more than 12,500 financial advisory firms with investment and technology solutions to invest their own clients' money. Privately held for 70 years, Fidelity employs more than 40,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.