Active ETFs continue to experience explosive industry growth, and Fidelity is positioning itself as a leader. Fidelity has been long known for its fundamental stock-picking based active strategies, built on a rich heritage of deep company research. However, investors who are traditionally hesitant to step away from indexing are now finding a compelling middle ground in the firm’s expanding systematic lineup.
“Fidelity is thrilled to be in the middle of the industry’s active ETF growth,” commented Greg Friedman, Head of ETF Management and Strategy at Fidelity in an exclusive interview with TMX VettaFi. “We recently launched more enhanced ETF products to fill out the style box. The quantitative, rules-based approach has offered a low-risk entry point to active management.”
Key Takeaways
- Fidelity expanded its active ETF style box options into smaller capitalization segments.
- Rules-based quantitative strategies offer low-risk active alternatives to standard market-cap benchmarks.
- Advisors can leverage institutional research to harvest alpha across global growth and value.
The "Beta-Plus" Innovation and Style Box Expansion
According to Friedman, for advisors seeking a “Beta-Plus” experience, the Fidelity Enhanced ETF suite serves as an ideal core replacement strategy. These systematic strategies utilize a quantitative approach designed to generate better returns than a standard index, but with minimal extra risk. They typically aim for just 1% to 2% of tracking error. Like other Fidelity ETFs, these funds deliver a low-cost active strategy that isn’t significantly more expensive than passive beta. This makes them attractive for filling out the traditional style box.
To provide even greater flexibility, Fidelity extended this systematic approach down the market-cap spectrum at the end of April by launching four style-specific funds:
- Fidelity Enhanced Mid Cap Growth ETF (FEMG)
- Fidelity Enhanced Mid Cap Value ETF (FEMV)
- Fidelity Enhanced Small Cap Growth ETF (FSEG)
- Fidelity Enhanced Small Cap Value ETF (FSEV)
Fidelity has built a loyal following among advisors with its competitively priced, actively managed equity ETFs. These newer listings joined highly successful established core funds like the Fidelity Enhanced International ETF (FENI ), the Fidelity Enhanced Mid Cap ETF (FMDE ) and the Fidelity Enhanced Small Cap ETF (FESM ), which each gathered more than $1 billion of net inflows in 2026.
Modern Quant Meets Active Management
Like their siblings, these new funds utilize a proprietary security selection model that has undergone refinement over the past 15 years to outperform their respective Russell benchmarks. Instead of simply replicating an index, portfolio managers use a research-driven, systematic selection process that is quantitative and objective, helping to eliminate human emotions and investing biases.
To achieve this, the process incorporates tight, integrated risk controls to keep sector exposure and volatility similar to the benchmarks. At the same time, Fidelity utilizes active factor tilts—targeting long-term return drivers like valuation, growth, and quality.
A Comparison of Fidelity Active ETF Suites
| Feature / Strategy Type | Fidelity Enhanced ETF Suite (Beta-Plus) | Fidelity Fundamental ETF Suite (Traditional Active) |
|---|---|---|
| Core Philosophy | Quantitative, systematic rules-based models | Bottom-up, research-driven security selection |
| Primary Objective | Outperform benchmarks with tight risk controls | Maximize alpha through high-conviction ideas |
| Expected Tracking Error | Low (typically targeted around 1% to 2%) | Higher (less anchored to passive index weights) |
| Ideal Portfolio Role | Core index replacement/core style box completion | Satellite alpha generator / high-conviction sleeve |
| Core Fund Examples | FMDE, FESM | FFLC, FFSM |
Fundamental vs. Enhanced Active ETFs
Fidelity’s broader active lineup gives investors two distinct ways to capture alpha. While the Enhanced suite uses a tight quant model to closely replicate index characteristics with a performance boost, the Fidelity Fundamental ETF suite represents a more traditional active approach. According to Friedman, the fundamental strategies blend quantitative models with human oversight, packing the absolute “best ideas” from Fidelity’s active portfolio managers into the portfolio.
The fundamental suite inherently carries higher tracking error but offers greater alpha potential because it leans harder on individual security selection, The Fidelity Fundamental Large Cap Core ETF (FFLC ) and the Fidelity Fundamental Small-Mid Cap ETF (FFSM ) are a popular few examples.
Whether utilizing the tight tracking of the Enhanced “Beta-Plus” funds or the high-conviction stock selection of the fundamental suite, Fidelity has successfully built a comprehensive toolkit for advisors that bridges the gap between passive efficiency and active alpha.
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