Fidelity International plans to expand its active ETF range in Europe with the launch of eight options-based funds.
The first four exchange-traded funds filed with the Central Bank of Ireland are “buffer” strategies, offering protection against market falls in global, US and Europe equities.
They are:
- Fidelity Global Equity Dynamic Buffer UCITS ETF
- Fidelity US Equity Dynamic Buffer UCITS ETF
- Fidelity Europe Equity Dynamic Buffer UCITS ETF
- Fidelity All Country Equity Dynamic Buffer UCITS ETF
The second group filed with the Irish regulator are “enhanced yield” funds which use covered call options to generate extra income instead of downside protection.
They are the:
- Fidelity Global Equity Enhanced Yield UCITS ETF
- Fidelity US Equity Enhanced Yield UCITS ETF
- Fidelity Europe Equity Enhanced Yield UCITS ETF
- Fidelity All Country Equity Enhanced Yield UCITS ETF
The planned launches were first reported by ETF Stream.
By selling call options on their stocks and shares, these enhanced yield funds sacrifice some potential future upside to generate cash.
Buffer ETFs offer equity exposure but use options to limit losses to a pre-set level over with investors again sacrificing some potential upside.
The eight new funds will sit alongside Fidelity’s 17 research enhanced ETFs with seven dedicated to equities and 10 to bonds in Europe, US, Japan, Asia and emerging markets.
It also offers two higher conviction US Fundamental Large Cap Core and US Fundamental Small-Mid Cap UCITS ETF.
Our view
David Batchelor, senior analyst at QuotedData, said: “Fidelity’s planned move into buffer and enhanced yield ETFs underlines how active ETFs in Europe are moving beyond relatively straightforward stock and bond selection. They may appeal to investors who want equity exposure but are nervous about volatility, or who are looking for a higher level of income. However, the trade-off needs to be clear. Buffer strategies usually limit some of the upside, while covered call funds can lag in strongly rising markets”.
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