Fidelity Canada unveils factor-based “all-in-one” asset allocation ETFs

Jan 28th, 2021 | By | Category: Alternatives / Multi-Asset

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Fidelity Investments has launched two asset allocation ETFs in Canada constructed primarily from existing factor ETFs offered by the firm.

Kelly Creelman, Senior Vice President, Products & Marketing at Fidelity Investments Canada

Kelly Creelman, Senior Vice President, Products & Marketing at Fidelity Investments Canada.

The ETFs, which have listed on listed on NEO Exchange, provide globally diversified equity and bond exposure and cater to investors looking for single-ticker portfolio solutions.

The Fidelity All-in-One Balanced ETF (FBAL CN) utilizes a 60/40 strategic asset allocation to equity and fixed income securities, while the Fidelity All-in-One Growth ETF (FGRO CN) places greater emphasis on equities through an 85/15 strategic mix.

The funds’ equity sleeves consist of twelve index-based factor ETFs targeting low volatility, quality, value, or momentum factor risk premia within the US, Canadian, or global developed ex-North America stock market universes.

The funds’ fixed income sleeves comprise two ETFs – a passively managed Canadian bond fund that optimizes exposure to macroeconomic factors, specifically nominal interest rates and credit, in order to improve risk-adjusted performance, and an actively managed global bond fund.

Each underlying fixed income ETF is diversified across several bond sectors including government bonds, investment-grade corporate bonds, high yield securities, and floating rate debt.

Fidelity will levy no direct management fees on its ‘All-in-One’ ETFs, although investors will still be charged an indirect fee based on the weighted average cost of the underlying ETFs – expected to be between 0.35% and 0.37% at launch.

Kelly Creelman, Senior Vice President, Products & Marketing at Fidelity Investments Canada, commented: “In today’s uncertain times, Canadian financial advisors and investors are looking for more stability to help them achieve their investing and life goals − balanced funds are an ideal solution for this.

“With today’s launch of Fidelity’s new products, we are meeting demand by offering advisors and investors convenient ways that can help them grow their savings in a balanced manner.”

The funds are sub-advised by Geode Capital Management, a Boston-headquartered global investment manager with over $580 billion AUM. Geode oversees the funds’ asset allocations, rebalancing the funds annually or when their portfolios deviate by more than 5% from their long-term targets.

Each ETF has been seeded with assets of C$2.5 million. Distributions are made to investors in December.

Several other issuers offer asset allocation ETFs in Canada including Vanguard, RBC iShares, Horizons ETFs, and TD Asset Management. Generally, these funds have been built traditional beta ETFs, although RBC iShares offers a range of asset allocation ETFs constructed from its ESG-focused funds.

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