Fidelity US High Yield Corporate Bond ESG Paris-Aligned Multifactor UCITS ETF USD Hedged (GBP) Acc

Issuer: Fidelity International

Asset Class: Fixed Income

TER: 35bps

Trading Currency: USD

Pays Income: False

Listing Date: 24 Oct 2024

Ticker: FYUI

ISIN: IE000ARLR807

This actively managed fund seeks to achieve a combination of income and capital growth by investing primarily in a diversified portfolio of high-yield corporate debt securities from issuers in the United States. A key characteristic is its strong commitment to sustainability, as it focuses on issuers demonstrating favorable environmental, social, and governance (ESG) characteristics. The investment manager employs a proprietary systematic, multifactor investment process to construct the portfolio. This strategy aims to outperform the broader high-yield market by carefully selecting securities based on a blend of fundamental factors and rigorous ESG criteria, offering a modern approach to fixed-income investing.

Central to the fund's strategy is its alignment with the Paris Agreement's long-term global warming objectives. It applies specific ESG ratings and screens to exclude companies involved in controversial business activities, such as weapons manufacturing and thermal coal, or those violating international norms. The portfolio construction is designed to achieve a significant reduction in greenhouse gas emissions compared to the broader high-yield corporate bond market and aims for a year-on-year decarbonization trajectory. The multifactor model integrates these ESG considerations with traditional financial metrics like value, quality, and momentum to identify securities with the potential for strong risk-adjusted returns.

This financial instrument is suitable for investors looking for exposure to the higher income potential of the U.S. high-yield bond market while adhering to a stringent sustainable and climate-focused investment mandate. The currency-hedged nature of this specific share class is designed to mitigate the impact of exchange rate fluctuations for investors whose primary currency is sterling. As an accumulating share class, all income generated by the underlying bonds is automatically reinvested back into the fund, which is ideal for those prioritising long-term capital appreciation over regular income distributions. It can serve as a core component for a sustainable fixed-income allocation.