Fidelity launches multifactor equity ETF for rising inflation

Nov 11th, 2019 | By | Category: Equities

Fidelity Investments has launched a new ETF providing multifactor exposure to US equities while emphasizing industries that have historically outperformed in periods of rising inflation.

Colby Penzone, Head of Investment Product at Fidelity Investments

Colby Penzone, Head of Investment Product at Fidelity Investments.

The Fidelity Stocks For Inflation ETF (FCPI US) has listed on Cboe BZX Exchange and comes with an expense ratio of 0.29%.

The fund is linked to the proprietary Fidelity Stocks for Inflation Factor Index which selects its constituents from the Russell 1000 universe of US large- and mid-cap stocks.

Potential constituents are ranked within their sectors based on Fidelity’s multifactor analysis which favours firms with attractive valuations, high-quality profiles, and positive momentum signals.

The methodology selects a subset of the highest-ranked stocks from each sector to be included in the index.

Constituents are weighted by market capitalization with an over- or under-weight adjustment based on the correlation of the stock’s sector performance to changes in US inflation. Stocks residing in sectors that have historically outperformed during periods of rising inflation have their weight increased in the index.

According to Fidelity, the ETF may serve in the core of an investor’s portfolio or as a satellite holding for those who wish to protect against, or profit from, rising inflation.

The fund’s strategy is similar in nature to that of the Fidelity Dividend ETF for Rising Rates (FDRR US), which launched in September 2016 and has accumulated over $350 million in assets under management. This fund tracks a proprietary index targeting dividend-paying companies that are expected to continue to grow their dividends while also having a positive correlation rising 10-year US Treasury yields. It comes with an expense ratio of 0.29%.

Colby Penzone, Head of Investment Product at Fidelity Investments, commented, “At a time when other financial services firms may be scaling back, Fidelity remains a market leader, focused on innovating in all aspects of our business.

“Our new thematic investment products are another example of how we are expanding our investment capabilities to ensure that we’re continuing to deliver a differentiated and complete suite of investment products and solutions that meet the evolving needs of our customers, now and in the future.”

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