History is on the side of the financial sector with the prospect of additional rate cuts to come. This could provide the perfect investment opportunity for an active ETF like the Fidelity Disruptive Finance ETF (FDFF ).
Looking at the financial sector from a fundamental perspective today, falling interest rates can help stimulate demand for loan products that weren’t there the last few years. Financial services companies that draw a significant amount of revenue from consumer lending products like mortgages, car loans, and business loans can prosper in a low-rate environment.
Additionally, as demand starts to pick up in the sector, companies offering financial products and services will be seeking better ways to conduct business. This is where a fund like FDFF can offer opportunities.
The fund’s holdings include companies engaged in digital solutions to deliver more cost-effective, efficient, and customized financial services. This could include stocks of companies offering digital payments, data processing, internet banks, and other disruptive lending and insurance business models. Artificial intelligence (AI) technology is also penetrating the financial sector with opportunities for innovation. As of September 30, FDFF’s top holdings include BlackRock, Capital One Financial Corp, and Equifax.
“Fidelity’s disruptive strategies seek to identify innovative developments that could signal new directions for delivering products and services to customers,” Fidelity’s product site for FDFF noted. “Generally, these companies have or are developing new or unconventional ways of doing business that could disrupt and displace incumbents over time.”
An Active Solution
Furthermore, FDFF offers an active solution that provides investors with flexibility in the market. The fund’s portfolio managers can tap into their knowledge and experience in the disruptive financial sector. Doing so allows them to tailor their holdings to capture future growth and upside.
This is in stark contrast to passive funds tethered to an index. Those don’t offer the degree of flexibility that a fund like FDFF does. With an expense ratio of 50 basis points, this compares favorably to the FactSet Segment Average of 65 basis points.
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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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