Fidelity introduces GBP-hedged share classes for smart beta income ETFs

Jan 16th, 2018 | By | Category: Equities

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Fidelity International has introduced currency-hedged share classes for three of its London-listed smart beta income ETFs.

Fidelity introduces currency hedging on smart beta income ETFs

The new share classes will appeal to investors looking to mitigate the risk of adverse currency movements affecting fund performance.

Investors will now have the option of currency hedging with pound sterling on the Fidelity Europe Quality Income UCITS ETF (FEQP LN), Fidelity US Quality Income UCITS ETF (FUSP LN), and Fidelity Global Quality Income UCITS ETF (FGQP LN).

The funds trade in pounds sterling on the London Stock Exchange.

The firm’s other fund in the suite, which targets emerging markets equity, remains available only in unhedged format.

Each ETF provides exposure to stocks which have historically demonstrated good profitability, strong cash-flows, and consistent dividends with the objective of delivering a yield in excess of the broader market, while concurrently managing risk.

The funds track in-house Fidelity indices which first exclude any security with no dividend yield, an excessively high payout ratio, or negative five-year dividend growth. Constituents are then evaluated according to quality factors, with each security receiving a composite score based on an equal-weighted combination of their z-scores across three factors (cash flow margin, return on invested capital and free cash flow stability). The bottom half of the ranked securities are subsequently excluded.

The remaining constituents are assigned a size-adjusted dividend composite score by multiplying their trailing 12-month dividend yield by company size. The highest ranked stocks are selected for final inclusion with the methodology allowing for country (where applicable), sector, and stock diversification by employing a sector/size-adjusted market-cap-weighting scheme.

FEQP and FUSP have total expense ratios of 0.35% while FGQP charges 0.45%.

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