Fidelity High Yield Factor ETF

FDHY

Market cap $565M

The iShares High Yield Muni Active ETF (CBOE:HIMU) sits in one of the more specialized corners of the bond market: actively managed, below-investment-grade and non-rated municipal debt, wrapped in an ETF and pitched at investors hunting tax-advantaged income that ordinary muni funds cannot match.

Fidelity Enhanced High Yield ETF (NYSEARCA:FDHY) pays monthly, currently distributes around $0.27 per share, and has quietly delivered a 10% total price return over the past year.

I compare Fidelity Sustainable High Yield ETF (FSYD) and Fidelity Enhanced High Yield ETF (FDHY), two distinct high yield strategies. FSYD focuses on ESG criteria, investing in socially conscious issuers using both fundamental and quantitative analysis. FDHY employs quantitative analysis and proprietary research, targeting BB/B-rated global high yield securities.

Fidelity Enhanced High Yield ETF delivers a 6% yield via an actively managed, diversified junk bond portfolio with low duration risk. FDHY has outperformed HYG and key competitors in total return and Sharpe ratio since inception. The FDHY fund demonstrates better capital preservation than peers, though its price is marginally down since inception and distributions have lagged inflation.

Fidelity Investments is one of the largest asset managers in the world with a full menu of investment vehicles.

Retirees are liking exchange-traded funds (ETFs) that offer dividends, but many of them pay out quarterly.

As the rate-cutting cycle ebbs, security selection will become more important in the bond market. FDHY and FTBD both use active, tactical approaches to investing in all corners of the bond market.

It's no secret that Social Security has been lurching towards insolvency for several decades.

Fidelity Enhanced High Yield ETF offers active management in high-yield bonds, focusing on BB and B ratings for attractive income with controlled risk. FDHY uses a quantitative model to select bonds, aiming for higher yield and potential alpha, while maintaining a risk profile similar to its benchmark index. Current macro indicators show BB/B spreads are not at extremes and credit card delinquency is elevated but manageable, supporting the fund's risk/reward profile.

Fidelity has a pretty impressive roster of retiree-friendly ETFs (Exchange-Traded Funds), many of which have dividend yields on the high end.