Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the Fidelity Quality Factor ETF (FQAL) is a smart beta exchange traded fund launched on 09/12/2016.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Fidelity. FQAL has been able to amass assets over $1.45 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the Fidelity U.S. Quality Factor Index before fees and expenses.
The Fidelity U.S. Quality Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with a higher quality profile than the broader market.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for FQAL are 0.15%, which makes it one of the cheaper products in the space.
FQAL's 12-month trailing dividend yield is 1.13%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 34.9% of the portfolio. Financials and Industrials round out the top three.
Taking into account individual holdings, Nvidia Corp (NVDA) accounts for about 7.53% of the fund's total assets, followed by Apple Inc (AAPL) and Alphabet Inc Cl A (GOOGL).
FQAL's top 10 holdings account for about 37.79% of its total assets under management.
Performance and Risk
The ETF has gained about 11.99% and is up about 18.41% so far this year and in the past one year (as of 08/21/2026), respectively. FQAL has traded between $70.75 and $85.47 during this last 52-week period.
The ETF has a beta of 0.94 and standard deviation of 13.66% for the trailing three-year period. With about 130 holdings, it effectively diversifies company-specific risk .
Alternatives
Fidelity Quality Factor ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the Vanguard 500 Index Fund ETF Shares (VOO) tracks S&P 500 Index. iShares Core S&P 500 ETF has $889.35 billion in assets, Vanguard 500 Index Fund ETF Shares has $1019.8 billion. IVV has an expense ratio of 0.03% and VOO changes 0.03%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Fidelity Quality Factor ETF (FQAL): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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