Making its debut on 09/12/2016, smart beta exchange traded fund Fidelity Quality Factor ETF (FQAL Quick QuoteFQAL - Free Report) provides investors broad exposure to the Style Box - Large Cap Blend category of the market.

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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Managed by Fidelity, FQAL has amassed assets over $1.31 billion, making it one of the larger ETFs in the Style Box - Large Cap Blend. FQAL, before fees and expenses, seeks to match the performance of the Fidelity U.S. Quality Factor Index.

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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.15% for FQAL, making it one of the cheaper products in the space.

It's 12-month trailing dividend yield comes in at 1.21%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

For FQAL, it has heaviest allocation in the Information Technology sector --about 32% of the portfolio --while Financials and Industrials round out the top three.

Taking into account individual holdings, Nvidia Corp (NVDA) accounts for about 7.54% of the fund's total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).

FQAL's top 10 holdings account for about 36.13% of its total assets under management.

Performance and Risk

So far this year, FQAL has lost about -0.17%, and is up roughly 25.65% in the last one year (as of 04/13/2026). During this past 52-week period, the fund has traded between $59.36 and $77.54.

FQAL has a beta of 0.97 and standard deviation of 13.75% for the trailing three-year period. With about 129 holdings, it effectively diversifies company-specific risk .

Alternatives

Fidelity Quality Factor ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

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 $747.03 billion in assets, Vanguard 500 Index Fund ETF Shares has $853.74 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.