Fidelity High Yield Factor ETF

FDHY

Market cap $423M

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.

FDHY uses an active, research-driven approach to select high-yield bonds, focusing on short maturities and risk management. The ETF has outperformed a high-yield benchmark and major competitors in total return and Sharpe ratio. Junk bond ETFs are a questionable choice for the long term; they may be better used in tactical allocation strategies.

Active versus passive has been a big debate in the fixed income ETF space in recent years. While passive approaches are commonly thought to offer simplicity and lower fees, a compelling case can be made for the continued relevance and potential outperformance of active management in the fixed income market.

In light of the economic, demographic and health quality changes that American retirees currently face, certain rules of thumb that many financial professionals have sworn by for decades are due for re-evaluation.

Fidelity Investment's investment-grade securitized ETF is seeing noteworthy investor attention in the current environment. The strong interest places the Fidelity Investment Grade Securitized ETF (FSEC) among the top 10 most popular active ETFs in 2025 to date, as measured by net flows, according to Kirsten Chang, senior industry analyst at VettaFi.

Many investors have underweighted high yield bond ETF strategies in recent years, satisfied with the opportunities found in other segments of the fixed income market. While seemingly a smart defensive strategy, avoiding high yield exposure could cause investors to unintentionally increase overall risk.

Fidelity Enhanced High Yield ETF is an active ETF using a quantitative model to select high yield bonds, focusing on BB and B rated credits with minimal CCC exposure. The fund has a robust track record, outperforming passive peers but slightly trailing another active ETF, HYDB, in total returns. Current high yield spreads are at a decade low, making the market overbought and not an attractive entry point for FDHY.

Cost is one reason why investors may prefer the ETF wrapper over mutual funds for active high-yield bond exposure. ETFs charge shareholders an expense ratio, which pays for fund management and operations.

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