The top five holdings of this large-cap fund are: Exxon Mobil Corp (XOM , 3.31% of assets); JPMorgan Chase & Co (JPM, 2.95%); Johnson & Johnson (JNJ, 2.60%); Wells Fargo & Co (WFC, 2.52%) and AT&T Inc (T, 2.42%).
Fidelity Large Cap Value Enhanced Index (FLVEX)
From Fidelity Monitor & Insight
Though enhanced index funds hew closely to specific benchmarks in terms of their sector exposures and other metrics (such as market cap and valuations), the funds’ managers use computer algorithms to guide their selection of individual stocks. The goal: to add alpha, or returns in excess of the fund’s benchmark.
While enhanced funds are unlikely to dramatically outperform their bogey, their risk controls, lower fee structure, and modicum of active management have met with success.
Fidelity Large Cap Value Enhanced Index (FLVEX) provides lower-risk exposure to big-cap stocks. Large Cap Value Enhanced Index) already provides greater exposure to financials—especially bank shares—that we seek. The fund is also less volatile and should perform in line with its benchmark.
What we’re really after is total return, and we see a greater likelihood of achieving that right now through Large Cap Value Enhanced Index. In particular, this trade increases the models’ exposures to financials, which should benefit from Trump’s policies.
Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight, www.fidelitymonitor.com, 800-397-3094, January 2017