Fidelity ETF FFEM champions active stock selection in EM

At the TMX VettaFi Midyear Symposium, institutional portfolio manager Benjamin Treacy described Fidelity’s Fundamental Emerging Markets ETF (FFEM) as an actively managed fund that selects stocks through analyst research instead of following a market-cap-weighted index. A live audience poll at the event showed renewed investor interest in emerging-market equities for diversification.

FFEM seeks long-term capital growth by investing in emerging-market securities, depositary receipts and related derivatives. Fidelity defines emerging markets using MSCI and World Bank criteria and evaluates issuers by domicile, assets and revenue exposure. The fund’s process begins with fundamental analyst research and FMR reference portfolios, followed by a quantitative portfolio construction step to highlight high-conviction names while managing liquidity and country-level risk.

Treacy noted, “We have a dedicated emerging markets portfolio management and research teams.” He added the firm draws on the work of five different emerging-markets experts and applies their highest-conviction ideas to the fund. Treacy also said a bottom-up stock-picking approach remains important, arguing that “index-level overall performance isn’t everything.”

Speakers at the symposium described actions active managers can take in volatile international markets: selling positions that appear overvalued, realizing gains and reallocating capital to underappreciated opportunities before broader market repricing. FFEM’s quantitative overlay is intended to balance concentrated bets with controls for liquidity and country risk.

The live poll reflected investor appetite for emerging-market exposure after a period of concentrated returns from large U.S. technology companies. Attendees indicated interest in diversifying away from single-market concentration, and speakers warned that emerging-market investing carries distinct political and economic risks that require ongoing oversight.

Fidelity’s approach for FFEM combines analyst-driven stock selection across multiple portfolio managers with a rules-based construction step to create a concentrated, risk-managed portfolio. The fund’s mandate aims to provide selected exposure to emerging markets while addressing liquidity constraints and country-level risks.