Fidelity digs in with several high quality low volatility ETFs
Fidelity is carrying on with its global strategy to take ETFs more seriously, rolling out a smart beta ETF suite in Toronto.
- Fidelity Canadian Low Volatility Index ETF (FCCL) – 0.35%
- Fidelity Canadian High Quality Index ETF (FCCQ) – 0.35%
- Fidelity International High Quality Index ETF (FCIQ)
- Fidelity International Low Volatility Index ETF (FCIL) – 0.45%
- Fidelity U.S. Low Volatility Currency Neutral Index ETF (FCLH) – 0.38%
- Fidelity US High Quality Currency Neutral Index ETF (FCQH) – 0.38%
- Fidelity US High Quality Index ETF (FCUQ) – 0.35%
The funds will all track in-house indexes, which bear names similar to those of the fund. The in-house indexes will help ensure that Fidelity’s profit margins stay higher.
The low volatility ETFs all use roughly the same methodology. They pick out sufficiently sizeable and liquid mid and large caps, based on low volatility. Where volatility is measured as 5-year beta and standard deviation of price return.
The high quality ETFs likely use a very similar methodology. They pick out quality large and mid caps, where quality is measured by free cash flow and return on invested capital. The standard modulates slightly for banks, however. For banks, the funds use ROE and debt-to-assets as the quality measures.
To avoid size bias and overconcentration in one sector, all of the above ETFs build in a size factor into its calculations and provides adjustments for each sector. The funds hold 60 – 100 securities at any given time and weights them by volatility and quality scores.
The currency neutral funds use derivatives to neutralise currency risk.
Tortoise lists cloud and fintech thematic ETFs
Kansas-based Tortoise Advisors is listing two new thematic ETFs that track in-house indexes.
- Tortoise Cloud Infrastructure Fund (TCLD)
- Tortoise Digital Payments Infrastructure Fund (TPAY)
TCLD will invest in companies Tortoise believes are boosting cloud infrastructure in rich countries. Cloud companies are understood to be those that make at least 50% of their revenues from any of the following: Cloud Systems; Cloud Consulting Software or Services; Cloud Security Cloud Hardware; Cloud Data Centers (including REITs).
TPAY will invest in companies that help the nascent fintech industry grow wings. The company defines digital payments companies as those making 50% of their revenue from:
Global Digital Payments (including credit card issuers and networks, as well as merchant acquirers); and Innovative Transaction Solutions and Services (Companies that provide software and services that help make digital payments.)
Both funds will invest in at least 30 companies. Companies included will be market weighted with the weights of the biggest companies capped at 4.5%. Both charge 0.40% a year.