Fidelity Launches Three New Liquid Alts ETFs for Enhanced Equity

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In response to increasing investor interest in securing losses while still having the chance for higher returns, Fidelity Investments has introduced three new exchange-traded funds (ETFs): Fidelity Dynamic Buffered Equity Fund (FBUF), Fidelity Protected Equity Fund (FHEQ), and Fidelity Enhanced Yield Equity Fund (FYEE). These actively managed ETFs aim to provide a core equity investment, augmented by options strategies.

Expanding Fidelity’s Alternatives Offering

This launch expands Fidelity’s collection of liquid alternative investments, responding to market demand for creative investment options. According to Bill Irving, head of Fidelity Asset Management Solutions, there is increasing client interest in safeguarding their stock investments during market downturns while also exploring additional income possibilities. Irving believes that these new ETFs will offer investors ways to minimize risk, decrease volatility, or boost returns through Fidelity’s active management expertise.

Fidelity enters the market for retiree-preferred candies, offering various flavors through a pair of Exchange-Traded Funds (ETFs). The first, a Buffer ETF, focuses on Hedged Equity and “Yield Enhanced” investments. These strategies utilize options to minimize potential losses. Fees for these ETFs are set at 0.48% and 0.28%, respectively.

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New ETFs are based on a fundamental U.S. stock strategy, designed to surpass the S&P 500 Index. Fidelity’s multifactor model identifies companies with favorable valuations and excellent quality indicators. This method ensures similar risk characteristics for each ETF compared to its corresponding index.

Features of the New ETFs

The Fidelity Dynamic Buffered Equity ETF (FBUF) employs a combination of call selling and put buying techniques to construct a flexible “protective barrier.” This defensive investment method aims to deliver substantial downside risk mitigation while potentially limiting the fund’s upside gains.

The Fidelity-Hedged Equity ETF (FHEQ) is specifically designed for investors who wish to protect against significant market declines. It accomplishes this by purchasing put options with various expiration dates and strike prices. This fund may underperform during periods of low volatility or sideways markets, but it can help shield investors from substantial losses during market downturns.

In simpler terms, Fidelity Yield Enhanced Equity ETF (FYEE) aims to provide a higher than average distribution yield through an active covered call strategy. This technique allows investors to earn additional income but sets a cap on the fund’s growth if the equity market surges beyond the call options’ strike prices.

Among the team leading the management of these ETFs are Eric Granat, Anna Lester, George Liu, Mitch Livstone, and Shashi Naik. Their combined experience is noteworthy. The prices of these ETFs sit comfortably in the market, with projected net expense ratios of 0.48% for FBUF and FHEQ, and 0.28% for FYEE.

Fidelity’s Commitment to ETFs and Investments

Fidelity’s ETF collection, comprised of around 70 products and approximately $70 billion in assets, showcases Fidelity’s commitment to providing a diverse range of investment options. One of these new additions is the Fidelity Wise Origin Bitcoin Fund (FBTC), marking Fidelity’s entry into the digital asset tracking sector.

In addition to exchange-traded funds (ETFs), Fidelity offers various alternative investment approaches. These include private equity, private credit, real estate, and digital assets. Fidelity continues to lead the way by introducing new investment solutions that cater to evolving investor demands and placing a strong emphasis on education for ease of use and optimal results.

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2024-04-12 08:04