Fidelity Investment Grade Securitized ETF (FSEC US) - Portfolio Construction Methodology

Core Insights - The Fidelity Investment Grade Securitized ETF (FSEC) aims to generate high current income from investment-grade securitized credit while managing interest-rate and prepayment risks [1] Portfolio Construction Methodology - The portfolio typically holds at least 80% in securitized debt, including agency and non-agency MBS, CMBS, and ABS [1] - The investment strategy utilizes the Bloomberg U.S. Securitized Index to align overall rate risk [1] - Security selection involves cash-flow modeling, option-adjusted spread/convexity analysis, structure and tranche vetting, collateral performance, servicer quality, and relative-value signals across sectors and coupons [1] - Emphasis is placed on sector and structure diversification, liquidity tiers, and risk budgeting for curve, spread, and extension/prepayment exposures [1] - Forward-settling TBAs/dollar rolls and derivatives may be employed to fine-tune duration, basis, and carry [1] - Continuous rebalancing occurs, driven by basis shifts, convexity asymmetry, collateral migration, and price/value gaps; positions are reduced in response to deteriorating credit/structure, adverse seasoning dynamics, or inefficient optionality [1]