Fidelity Enhanced Large Cap Growth ETF

FELG

Market cap $4.54B

Fidelity Enhanced Large Cap Growth ETF is managed actively, putting emphasis on promising names from the Russell 1000® Growth Index. FELG has delivered outstanding performance since the conversion into an ETF in 2023, beating IWF, SCHG, QQQ, and IVV. FELG's NVDA-heavy portfolio currently has a GARP tilt, which is confirmed by the PEG ratio and other metrics.

One of my retirement investing platforms happens to be Fidelity, so I've been diving deeper into which exchange traded funds (ETFs) may fit my risk profile and investing time horizon better than others of late.

FELG offers high growth exposure but is heavily concentrated, increasing idiosyncratic risk and potential volatility. Current macroeconomic signals—slowing GDP, softening labor market, and inflation pressures—warrant caution for aggressive growth allocations. Despite admirable long-term returns, FELG has underperformed recently and faces competition from cheaper, better-performing growth ETFs.

Many investors look to large-cap growth or value ETFs for core equity exposure. Fidelity has two funds in its Enhanced ETF suite that may be able to add a growth or value tilt to a portfolio's equity exposure: the Fidelity Enhanced Large Cap Growth ETF (FELG) and the Fidelity Enhanced Large Cap Value ETF (FELV).

The Fidelity Enhanced Large Cap Growth ETF (FELG) has a higher expense ratio and turnover rate compared to other growth funds, potentially dragging long-term performance. FELG's dynamic portfolio adjustment strategy has not consistently reduced downside risk or outperformed other growth funds like VUG and IWF in the past. The fund's heavy exposure to the technology sector aligns with growth trends but is comparable to other growth funds, offering no significant advantage.

In mid-November, Fidelity Investments joined the select ‘$100 billion in ETF assets' club. While the firm still has a sizable presence in the mutual fund world, Fidelity's ETFs have been gaining traction in 2024.

The Fidelity Enhanced Large Cap Growth ETF is an actively managed fund aiming to outperform the Russell 1000 Growth Index. The portfolio is heavily weighted in mega-cap companies and the information technology sector, with significant exposure to semiconductors and software. FELG has underperformed its benchmark since inception but has shown better performance in shorter time frames, particularly in 2024.

While some debate the merits of active versus passive investment, advisors and investors no longer have to choose one over the other. The Fidelity Enhanced ETFs offer the best of both worlds by providing exposures similar to core equity benchmarks but with the benefits of active management.

Many funds exist for equity investors, but few combine the benefits of core exposures alongside active management. The Fidelity Enhanced ETF suite seeks to outperform its benchmarks through its active strategy.

Converted to an ETF in November 2023, the actively managed Fidelity Enhanced Large Cap Growth ETF has seen some notable momentum amid the rally in long-duration equities. While having an over 76% overlap with SCHG, FELG has a marginally softer growth profile but better capital efficiency characteristics and a slightly larger value exposure. I am impressed by its performance, but its expense ratio is higher than SCHG's and its liquidity is less appealing.