Under the cover of Fidelity’s new active ETFs

With Fidelity International’s four new active exchange-traded funds (ETFs) now available to investors, the funds’ portfolio managers shed light on what each product offers.

Fidelity International recently announced the launch of four active ETFs for Australian investors after confirming the delisting of one of its existing active ETFs from the ASX.

The four actively managed ETFs are:

• Fidelity Global Future Leaders 
• Fidelity Asia 
• Fidelity India 
• Fidelity Australian High Conviction 

All four ETFs are now live to investors via the ASX. Speaking on a recent Fidelity webinar, the portfolio managers leading the four new funds shared further details.

Fidelity Global Future Leaders Active ETF

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Led by co-portfolio managers James Abela and Maroun Younes, the fund provides a diversified portfolio of 40–70 small- to mid-cap global companies.

“The opportunity set is large at US$9 trillion, which is about 5x to 6x the size of the Australian market,” said Abela.

Younes also noted the attractive valuation and diversification benefits of the small- to mid-cap sector.

“The mid-cap space sits in that sweet spot where it can offer a potential for higher returns versus the large-cap segment. It also doesn’t give you the same level of risk and volatility that you would get in the smaller end of town. It sits in that Goldilocks zone,” he said.

Fidelity Asia Active ETF

The Fidelity Asia Active ETF is a concentrated portfolio of typically 20–30 stocks across Asia that favours companies with a compelling business model and above-average earnings rate.

Gary Monaghan, investment director for the Fidelity Asia Active ETF, recognised how negative outlooks towards China and Hong Kong have dominated the broader region.

“This somewhat masks the strong fundamental stories we are seeing, such as the economic development in India, for example, or the tech leadership from Korean or Taiwanese companies.”

Monaghan observed the green shoots of economic recovery coming through in China, which is worth long-term monitoring for future growth projections.

Fidelity India Active ETF

This fund provides investors with a diversified portfolio of typically 40–60 high-quality Indian companies with scaleable business models and strong management.

While some investors have described India as being the new China, Amit Goel, portfolio manager for India fund, explained the particular characteristics that are unique to India’s economy.

“When India gets compared to China, obviously this is a very natural comparison given the size of the economy and India is where China was 15 years back. But I believe apart from that comparison, there are very important building blocks being put in place in India which will drive strong growth over the next 10 to 15 years,” Goel said.

These building blocks include India’s predominantly young population, investment in infrastructure, job creation and digitisation of its economy, the portfolio manager identified.

“India is probably the only economy in emerging markets that can repeat what it has done in the last 15 years. This ETF gives you access to its unprecedented growth story.”

Fidelity Australian High Conviction Active ETF

The Fidelity Australian High Conviction Fund is actually the existing Fidelity Australian Opportunities Fund with a new name, which targets 20–40 local high-quality stocks.

Casey McLean, portfolio manager for the ETF, highlighted how Australia has the best risk-adjusted returns out of any market globally.

“Australia has strong corporate governance and a stable government, strong population growth, and we’re resource-rich,” McLean said.

“From a long-term investor’s point of view, it's a pretty exciting time for Australian equities. This portfolio is designed to be a core position for long-term investors.”