Fidelity launches lowest-cost crypto industry and metaverse ETFs

Apr 25th, 2022 | By | Category: Equities

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Fidelity Investments has launched two new equity ETFs in the US providing low-cost exposure to emerging technology themes.

Greg Friedman, Head of ETF Management and Strategy at Fidelity Investments

Greg Friedman, Head of ETF Management and Strategy, Fidelity Investments.

The Fidelity Crypto Industry and Digital Payments ETF (FDIG US) invests in companies supporting the nascent digital assets ecosystem, while the Fidelity Metaverse ETF (FMET US) targets firms that are helping to develop and enable the metaverse.

The funds have been listed on Nasdaq with expense ratios of 0.39%, the lowest fees for ETFs targeting these investment themes.

Greg Friedman, Head of ETF Management and Strategy at Fidelity Investments, said: “Leveraging Fidelity’s decades of investment expertise, we are focused on growing our broad product line-up with innovative strategies that offer choice, value, and new opportunities to investors.

“We continue to see demand, particularly from young investors, for access to the rapidly growing industries in the digital ecosystem, and these two thematic ETFs offer investors exposure in a familiar investment vehicle.”

Investment approach

The ETFs are linked to proprietary indices that were constructed by Fidelity’s quantitative investing team.

The Fidelity Crypto Industry and Digital Payments Index begins with a global universe of developed and emerging market stocks from across the market capitalization spectrum.

The methodology screens for companies that derive at least 50% of their revenue from crypto mining and trading, digital asset exchanges and custody solutions, and the provision of blockchain technology.

The index also includes 20 companies that derive at least 50% of their revenue from the processing of digital payments, selecting those firms with the highest average daily trading volumes.

Constituents in the index are weighted by average daily trading volume subject to individual stock caps and a cumulative cap of 40% on digital payment processors.

The Fidelity Metaverse Index, meanwhile, begins with a similar expansive universe but does not include emerging market small-caps.

The methodology screens for companies deriving at least 50% of their revenue from metaverse-related industries such as computing hardware and components, digital infrastructure, design and engineering software, gaming technology and software, web development and content services, and smartphone and wearable technologies.

Firms in the screened universe are then assigned thematic relevance scores based on a combination of three metrics: total revenue derived from eligible industries; percentage of revenue derived from eligible industries; and a natural language processing metric that reflects how often keywords related to the metaverse are found in company statements.

The index selects the 50 stocks with the highest thematic relevance scores and weights them by the cubed root of their market capitalizations. Individual stocks are capped at 4.5%.

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