The Fidelity Emerging Markets Multifactor ETF (FDEM) seeks to track an index that measures emerging market stocks selected and weighted based on multiple quality and value factors. This multifactor approach targets companies in developing economies with strong fundamentals across metrics like profitability, financial health, and attractive valuations.
How It Works
FDEM uses a rules-based, quantitative approach that screens emerging market stocks across multiple factors including quality, value, low volatility, and momentum characteristics. The fund weights holdings based on factor scores rather than market capitalization, potentially overweighting undervalued, high-quality companies while reducing exposure to expensive or financially weak stocks. Rebalancing occurs semi-annually to maintain factor exposures and capture changing market conditions across approximately 20+ emerging market countries.
Key Features
- Multifactor methodology potentially reduces single-factor risk by combining quality, value, and momentum screens across emerging markets
- 0.00% expense ratio makes it one of the lowest-cost emerging markets factor ETFs available to investors
- 3.53% dividend yield provides income generation from emerging market dividend-paying companies with strong fundamentals
Risks
- This ETF can lose significant value during emerging market selloffs, potentially declining 40-60% during global risk-off periods like 2008 or 2020
- Currency fluctuations can amplify losses when emerging market currencies weaken against the U.S. dollar during global uncertainty
- Factor tilts may underperform broad emerging market indices during periods when growth stocks or momentum strategies dominate markets
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for investors with high risk tolerance and 7+ year time horizons seeking emerging markets exposure with factor-based risk management. Appropriate for investors wanting to diversify beyond developed markets while potentially reducing volatility through multifactor screening.