Fidelity Canada launches factor-based ETFs
Fidelity Investments Canada plans to launch a suite of factor-based ETFs and mutual funds for financial advisers and individual investors.
As part of a well-diversified portfolio, the Fidelity Dividend Factor ETFs and mutual funds are designed to deliver monthly income and provide a powerful, targeted investment approach. They are made up of a liquid, investable universe of stocks carefully constructed to avoid unintended risks and are monitored and rebalanced every year to ensure they hold the most attractive securities.
Fidelity's six new factor-based ETFs — Fidelity Canadian High Dividend Index ETF (FCCD), Fidelity US Dividend for Rising Rates Index ETF (FCRR), Fidelity US Dividend for Rising Rates Currency Neutral Index ETF (FCRH), Fidelity US High Dividend Index ETF (FCUD), Fidelity US High Dividend Currency Neutral Index ETF (FCUH) and Fidelity International High Dividend Index ETF (FCID) are expected to commence trading on the Toronto Stock Exchange on or about Tuesday, September 18, 2018. The new ETFs and mutual funds (Series F) will have management fees ranging from 0.35 per cent to 0.45 per cent.
"Factor investing offers tremendous opportunity to bring innovation to the Canadian marketplace. Launching our new Fidelity Dividend Factor ETFs and mutual funds reinforces our commitment to delivering an exceptional experience to our clients, an experience not just in terms of the quality and breadth of the offering but also our innovative approach to investment management," says Rob Strickland, President, Fidelity Investments Canada ULC.
The firm writes that in recent years, a new approach to index investing—factor investing—has started to gain traction among investors. Factor investing refers to an enhanced indexing strategy that seeks to exploit certain performance factors in an attempt to outperform a market cap-weighted benchmark index. In this sense, factor investing differs fundamentally from a traditional passive indexing strategy. A strategic allocation to a single or combination of factor-based strategies can help investors reap the potential long-term benefits of factors, and should be determined based on individual investment styles and objectives.
"Fidelity's Dividend Factor ETFs and mutual funds are designed to be an effective way for investors to obtain various exposures or to implement particular investment strategies," says Andrew Clee, Vice President ETFs, Fidelity Investments Canada ULC.
The firm writes that there are several ways investors can incorporate factor- based strategies into their broader portfolios as tools to add incremental returns, reduce risk, or achieve a desired investment outcome:
Strategic exposure to factors: Strategic allocations to factors can enhance risk-adjusted returns over the long-term. Investors may consider exposure to one or a combination of factors to take advantage of their potential benefits.
Portfolio construction and risk management tools: Investors and advisors can use factor-based strategies to fine-tune their exposures and better align their broader portfolios with their intended investment objectives and risk profiles.
Cyclical exposures that vary through time: Because factor returns can vary through time, adjusting factor exposures using a cyclical framework may help investors express a shorter-term market or investment view.
Fidelity is also launching the Fidelity Tactical Global Dividend ETF Fund, a single-ticket global dividend solution designed to generate income in various market environments. This fund leverages Fidelity's rich history of active portfolio management and strong quantitative research capabilities, to deliver a powerful investment solution to fulfil Canadian investors' income needs.
"By launching these products as ETFs and mutual funds, we are excited to make available our unique expertise in quantitative investing to both IIROC and MFDA licensed advisors," says Strickland.