Fidelity Investments just bolstered their Enhanced ETF lineup with four new funds, targeting mid- and small-cap equities with factor tilts. These actively managed funds offer investors sophisticated tools for better-than-passive performance. They maintain core equity exposure while targeting respective market cap segments.
The new listings include:
“Fidelity has built a loyal advisor following with its competitively priced, actively managed equity ETFs,” said TMX VettaFi Head of Research Todd Rosenbluth. “It’s encouraging to see them extend these asset allocation tools down the market-cap spectrum, giving advisors the flexibility to tilt toward growth or value in the mid- and small-cap space.”
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Modern Quant Meets Active Management
Like their Fidelity Enhanced ETF siblings, these funds utilize a security selection model that’s undergone refinement over the past 15 years. This proprietary quantitative investment process is designed to outperform their respective Russell benchmarks. In this particular case, the Russell Midcap Growth/Value and Russell 2000 Growth/Value indexes.
Unlike traditional passive index funds, the actively managed Enhanced suite doesn’t simply replicate an index. Instead, Fidelity’s portfolio managers use a research-driven approach. They identify and overweight stocks with fundamental characteristics or other characteristics that are conducive to potential outperformance.
The strategy includes the following:
- Systematic selection process: As noted in a whitepaper, the Enhanced ETFs use an investment process that is quantitative, systematic, and objective. This helps to mitigate human emotions and investing biases in the selection process.
- Integrated risk control: The funds aim to keep risk characteristics — such as sector exposure and volatility— similar to their benchmarks.
- Active factor tilts: The growth-focused funds identify long-term drivers of returns. Such drivers may include, but are not limited to, valuation, growth, quality, and other factors. Likewise, the value-focused funds look at the same factors within their associated value indexes.
“The Enhanced ETF suite is a manifestation of Fidelity’s deep quantitative investing capabilities, combining proprietary data, world-class research and rigorous testing to create a differentiated approach to active management based on systematic stock selection and risk management,” said Neil Constable, head of quantitative research and investments at Fidelity Investments. “The team develops systematic frameworks to gain exposure to companies with attractive characteristics — all while maintaining controlled levels of risk and market exposures. The result is a disciplined, repeatable approach delivered in a low‑cost actively managed ETF wrapper.”
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Expanding Small & Mid-Cap Optionality
Fidelity’s Enhanced ETF roster already includes the Enhanced Mid Cap ETF (FMDE ) and the Fidelity Enhanced Small Cap ETF (FESM ). The launch of FEMG, FEMV, FSEG, and FSEV provides targeted exposure to the more volatile mid- and small-cap markets using a factor style box.
In these specific market cap segments, research information gaps are often wider compared to large-cap stocks. That said, the active quantitative approach in the Enhanced ETF suite can be particularly effective at capturing these factor tilts that passive indexes might overlook.
These ETFs join a growing lineup of Fidelity active equity products, reflecting a broader industry shift targeting lower-cost, actively managed vehicles. Furthermore, the funds leverage Fidelity’s 75-year legacy in active research.
For more news, information, and strategy, visit ETFdb.
