Investors seeking international exposure may want to target companies using a discerning strategy as opposed to simply tracking an all-encompassing index. They can achieve this with the flexibility of an active ETF wrapper with the Fidelity Enhanced International ETF (FENI ).
FENI draws its holdings from the MSCI EAFE Index, which is comprised of 695 constituents across 21 developed markets, excluding the U.S. and China. With 318 holdings (as of July 31) or less than half that of the MSCI EAFE index in the fund, this speaks to its selective strategy.
The fund uses a research-driven approach that targets companies that derive returns from value, growth, quality, and a mix of other factors. Furthermore, the strategy involves computer-aided, quantitative analysis of the aforementioned factors. Overall, the goal is to select holdings from the MSCI EAFE Index, which can outperform the index over time.
That said, the fund has achieved that goal. Since the fund’s inception (December 2007), FENI has outpaced the broader index, rising almost 40% compared to the broader index’s 26% as of August 26.
Active & Low-Cost
FENI comes with a low expense ratio of 29 basis points or $29 per every $10,000 invested. Given its active strategy and international focus, it’s 25 basis points is lower than the FactSet Segment Average. Active strategies are especially useful in times like now when market uncertainty calls for flexibility. For investors looking to overcome the home bias of U.S. stocks will appreciate the flexibility of an active strategy when applied to the selection of international stocks.
“This is a relatively low-cost active ETF where the enhancements are more of a quantitative, strategic approach to investing,” said TMX VettaFi head of research Todd Rosenbluth, discussing the fund during an ETF of the Week podcast. “It’s got a broad approach to the overall strategy, it’s going to benefit from the selection of individual stocks, and it’s working quite well.”
In a time when more ETF providers are looking to increase their product suite with active ETFs, it’s again notable that FENI has been around since 2007. Active ETF launches have been outpacing their passive peers this year, but funds like FENI that have been around for years should garner more attention.
“Advisors and investors are increasingly turning toward active ETFs,” Rosenbluth confirmed.
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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