FactSet - Fidelity (2024)

FactSet delivers some of the world's best insight and information to investment professionals through superior analytics, service, content, and technology. More than 85,000 global users make smarter investment decisions with FactSet's desktop analytics, mobile applications, and comprehensive data feeds. FactSet ETF Data provides comprehensive reference and analytics data across the universe of exchange-traded products. FactSet ETF data is sourced from more than 80 providers, with one year of history for U.S. Reference Data and current European Reference Data. Learn more about FactSet's data solutions at FactSet.com/data, and follow us at Twitter.com/FactSet

ETF Methodology

FactSet ETF Analytics Scoring Methodology is one of the first wide-ranging and robust methodologies for evaluating, comparing and contrasting exchange-traded funds. The researchers and analysts at FactSet developed the system. The result of thousands of hours of research, debate and testing, FactSet ETF Analytics Scoring Methodology provides a comprehensive structure for investors to analyze ETFs.

FactSet's quantitative system allows an investor to evaluate a fund at a glance, aggregating a sweeping range of detailed, often-difficult-to-obtain data points. FactSet's Letter Grade combines our Efficiency and Tradability score evaluating costs to the investor. The combined score is assigned a letter grade (A-F) providing an institutional-caliber view on how well run and how liquid the ETF is. Efficiency includes risks, which are potential costs. Funds that minimize these risks can be more efficient.

Also provided to allow more granular review are the following three scores from 0 to 100:

1. Efficiency: Does the fund deliver on its core promise to investors without undue costs or risks?
2. Tradability: Can I get a fair deal buying or selling this fund in the open market?
3. Fit: How does this fund's portfolio compare with the core investment theme suggested by its stated objective?

Fit receives a stand-alone numerical score because Fit's job is different. The Fit score alerts investors about how closely the fund represents the broadest level of the investment theme's exposure. A high Fit score communicates, "This fund gives a broad market exposure," while a low Fit score signals an alternate approach to the segment. Some ETFs, such as a U.S. small-cap energy fund, may not "fit" well relative to a broad-based U.S. Energy index. The fund may nevertheless be well-run and liquid. In such a case, the fund will have a high letter grade and a low numerical score.

Paired together, the letter grade and numerical score paint a top-level picture of each ETF. For more detailed information, please refer to the ETF ANALYTICS SCORING METHODOLOGY (PDF)

STATEMENT OF PRINCIPLES

FactSet's ETF Analytics methodology is based on several key principles, loosely based on the CFA "SAMURAI" principles for index construction:

• Specified in Advance: The methodology is neither ad hoc nor subject to the whim of analysts. This document is proof that we aim to have a clear, predefined framework for analysis.
• Accountable: FactSet will listen to critiques and new information as they become available, and will incorporate current financial thinking and best practices into our process as necessary.
• Measurable: Our methodology is driven from quantitative data, and produces quantitative output.
• Unambiguous: While reasonable people may disagree on weighting, benchmark selection or even the sourcing of key data, there are no "black holes" or "editor overrides" present in our scoring system.
• Representative: We believe our methodology represents the best possible academic understanding of ETFs, their underlying markets, common benchmark criteria, investor preferences and academic finance.
• Appropriate: We have constructed this methodology specifically so investors can focus and deconstruct the components most appropriate to their investment goals.
• Investable: Above all else, the Occam's razor of our methodology has been, "Does the inclusion of this help investors make a more informed decision?"

A note on coverage: FactSet covers funds shortly after they begin trading; however, due to a lack of data, we do not create scores for funds less than six months old.

A note on terminology: When we say "funds" or "ETFs," we mean exchange-traded products structured as open-ended funds, grantor trusts, commodities pools, unit investment trusts or exchange-traded notes.

Coverage

Analyst and Quantitative driven research reports are provided for all U.S. listed ETFs traded on U.S. exchanges. When we say ETF's we mean exchange traded products structured as open-ended funds, grantor trusts, commodity pools, unit investment trusts or exchange traded notes. FactSet Ratings are available for over 1,500 of the 2,000 + U.S. listed ETFs.

FactSet covers funds shortly after they begin trading; however, due to lack of data, we do not create scores for funds less than six months old and we need up to twenty-four months of data for all metrics to be populated.

What's Provided on Fidelity.com

• ETF Ratings and Reports:
  1. FactSet Letter Grade: Combining our Efficiency and Tradability score, FactSet assigns a letter grade (A-F) that provides an institutional-caliber view on how well run and how own able each ETF is. We do not have a scores for Inverse or leveraged products, or funds without 18-24 months of trading history.
  2. Efficiency Score: A measure of how well a fund delivers on its core promise of tracking an underlying index, taking into account expense ratio and structural risk. Out of 100. Efficiency Score Averages by Segment: An average of the efficiency scores 1-100 for all funds in a segment to gain an understanding of the fund score ranking among peers.
  3. Tradability Score: A total view of liquidity of a fund taking into account share level liquidity as well as the underlying liquidity of a fund's portfolio of securities. Out of 100. Tradability Score Averages by Segment: An average of the efficiency scores 1-100 for all funds in a segment to gain an understanding of the fund score ranking among peers.
  4. Fit-Exposure Score: A measure of the exposure a fund provides relative to its FactSet designated 'Segment Benchmark'. Scored on a scale of 0 to 100. 0 being narrow, and 100 being broad and in-line with the 'Segment Benchmark'. Fit - Exposure Score Averages by Segment: An average of the efficiency scores 1-100 for all funds in a segment to gain an understanding of the fund score ranking among peers.
  5. Fund Reports in PDF format for all U.S. listed ETF's. When we say ETF's we mean exchange traded products structured as open-ended funds, grantor trusts, commodity pools, unit investment trusts or exchange traded notes. FactSet Fund Reports are available for over 1,500 ETFs. We also have an analyst pick for many segments represented by a blue ribbon and for larger segments we also have an opportunity pick represented by a yellow light bulb. The Analyst Pick or Blue Ribbon ETF represents an ETF selected by our analysts for its ability to deliver broad efficient exposure to a category. The Opportunity Pick or Yellow Light Blub ETF represents an ETF selected by our analysts for its ability to deliver niche, clever and often smart beta type exposure to a category.
• Data:

1. Median Tracking Difference (12 mo.): Our median tracking difference statistic updated daily captures all the inputs to tracking error -- expense ratio, optimization, securities lending, tax recapture to gives users a solid 'take home' example of the 1 yr. holding period of a fund. We do this by rolling 12 month holding periods over the last two years, then selecting the median tracking difference from the data set. We consider this statistic to be one of the most IMPORTANT data points to help investors understand the true cost of owning a fund when holding for 1 year or more. We do not have a score for Inverse or leveraged products, alternative products, or funds without two years of trading history.
2. Distributes K-1: ETFs that are structured as commodities pools and classified as limited partnerships by the IRS will issue K-1 forms to holders. This field identifies those funds for tax purposes, many investors will avoid funds that distribute a K-1.

News, commentary, and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that the information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from its use.

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