With the current growth-fueled market environment centered around Magnificent Seven names benefiting from the artificial intelligence (AI) theme, investors may want to look outside the U.S. to seek additional opportunities. One fund to consider in that quest for performance abroad is the Fidelity International Multifactor ETF (FDEV).
With a weakening dollar amid expectations of more U.S. Federal Reserve rate cuts to come, investing in international assets is drawing interest from investors. Rather than select individual stocks from a vast universe of international equities and expose the investor to concentration risk, an easier way to invest is through exchange-traded funds (ETFs) like FDEV.
However, FDEV isn’t just a fund that simply tracks an index with an insurmountable number of holdings. The fund is much more discerning with its 229 holdings (as of August 29). The fund tracks the performance of the Fidelity International Multifactor Index, which derives its constituents from large- and mid-capitalization developed international companies.
The discerning screener uses a multifactor approach that looks for companies that exhibit the following characteristics: attractive valuations, high quality profiles, positive momentum signals, lower volatility compared to the broader developed international equity market. And, to enhance diversification, the portfolio makes modest tilts to sectors with lower correlation to the U.S. equity market. As mentioned, much of the U.S. equity market today has been fueled by growth and momentum factors. FDEV’s multifactor approach ensures investors get exposure to international holdings that capture a blend of factors.
As of August 29, its top holding is Daito Trust Construction, which comprises just 1.7% of the fund. This eschews top heaviness in specific companies with a more balanced allocation across its 229 holdings in various countries.
Cost-Effective International Exposure
The popular trend in 2025 has been the proliferation of active ETFs. Midway through the year, active ETFs have been outpacing their passive peers in terms of new launches. FDEV is a reminder that investors don’t need to seek out only active strategies specifically in order to attain strong performance.
Furthermore, FDEV comes with a low net expense ratio of 19 basis points, or $19 per every $10,000 invested. Given its international focus, it’s net expense ratio is half the average expense ratio of competing funds in its category, according to the ETF Database Category Average and the FactSet Segment Average.
That said, investors looking to overcome the home bias of U.S. stocks and add portfolio diversification should consider FDEV. They will appreciate its cost-effectiveness and its ability to use a multifactor approach to international stocks.
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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