FDHY Profile
The Fidelity High Yield Factor ETF is designed to provide investors with exposure to the high-yield debt market by primarily investing in debt securities rated below investment grade, commonly referred to as high yield bonds or junk bonds. Under normal market conditions, the fund allocates at least 80% of its assets to these securities, seeking to capture the higher income potential that comes with investing in bonds with lower credit ratings. These investments typically carry a higher risk of default but offer the possibility of enhanced returns compared to investment-grade bonds.
The fund uses the ICE BofA BB-B US High Yield Constrained Index as a benchmark to guide its investment strategy, particularly in terms of credit quality distribution and risk characteristics. This index is designed to track the performance of U.S. dollar-denominated, high-yield corporate debt, and it provides a diversified representation of the BB and B-rated segments of the high-yield market. By aligning with this index, the fund aims to maintain a balance between risk and return, ensuring that its portfolio is structured to reflect the characteristics of the broader high-yield market.
Fidelitys management team employs a rigorous credit analysis process to select securities for the fund, focusing on bonds rated BB or B by major credit rating agencies such as S&P and Moodys, or those deemed to be of comparable quality by Fidelity Management & Research Company LLC (FMR). The fund may also invest in unrated securities that FMR considers to have similar risk and return profiles. This approach allows the fund to target bonds that offer attractive yields while managing the risks associated with lower-rated debt.
The Fidelity High Yield Factor ETF is well-suited for investors seeking higher income opportunities and who are willing to accept the increased risks associated with high-yield bonds. The funds focus on below-investment-grade securities provides potential for substantial income generation, making it an attractive option for those looking to diversify their fixed-income portfolios. It is particularly appropriate for investors with a higher risk tolerance and a long-term investment horizon, as the fund seeks to capitalize on the yield premium offered by the high-yield debt market.
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