Fidelity Japan Equity Research Enhanced UCITS ETF

Fund commentary

Investment rationale

This fund is an actively managed Japan equity UCITS ETF designed to achieve long-term capital growth from a portfolio primarily invested in Japanese equities. It has a summary risk indicator of 4 out of 7 and a recommended holding period of 5 years. The Key Information Document says it may appeal to investors with basic knowledge and no or limited experience of investing in funds, who seek capital growth over that period and income, and who understand the risk of losing some or all invested capital. Its role is a Japan equity allocation that remains broadly representative of the MSCI Japan Index while applying Fidelity sustainable and fundamental research and exclusions, making it a distinct way to access the Japanese market.

Investment strategy

The fund’s stated objective is to achieve long-term capital growth from a portfolio primarily made up of equity securities of companies in Japan. It invests primarily in equities of companies domiciled in Japan or exercising the predominant part of their economic activity there, and may use derivatives for efficient portfolio management and currency hedging purposes. The fund references the MSCI Japan (Net Total Return) Index / MSCI Japan Index (Net) as its benchmark for investment selection, risk monitoring, performance and carbon footprint comparison, and aims to outperform it by a target of 1% annualised gross returns over 5 years or more. The benchmark does not take ESG characteristics into account, while the fund promotes environmental and social characteristics under SFDR Article 8, aims for a portfolio ESG score above the benchmark, is accumulating, and reinvests dividends.

Investment philosophy

• The portfolio invests primarily in Japanese equities, specifically companies domiciled in Japan or deriving the predominant part of their economic activity there, and held 125 securities from 125 issuers at 31 August 2026.

• It is actively managed using a quantitative approach that usually focuses the portfolio on the highest conviction stock recommendations identified by Fidelity’s research analysts, combining sustainable and fundamental research.

• The fund excludes companies involved in certain activities and, on an ongoing basis, considers environmental and social characteristics including carbon intensity, carbon emissions, energy efficiency, water and waste management, biodiversity, product safety, supply chain, health and safety, and human rights.

• The MSCI Japan Index is used for investment selection, risk monitoring, performance and carbon-footprint comparison; the fund has limited discretion relative to the benchmark and may hold non-index securities or different weights, but the documents state portfolio and performance are unlikely to vary significantly from the benchmark.

• Positioning at 31 August 2026 was overwhelmingly in Japan at 99.0%, with largest holdings including Mitsubishi UFJ Financial Group, Toyota Motor, Recruit Holdings, Sumitomo Mitsui Financial Group, Hitachi, and Mizuho Financial Group; sector weights are led by Industrials, Financials, Information Technology and Consumer Discretionary.

The asset manager

The management company is FIL Investment Management (Luxembourg) S.à r.l., Ireland Branch. The documents state that this entity is a member of the Fidelity group of companies, and that Fidelity International refers to the group of companies forming the global investment management organisation providing information on products and services in designated jurisdictions outside North America. The fund itself is a sub-fund of Fidelity UCITS ICAV, domiciled in Ireland and authorised as a UCITS by the Central Bank of Ireland.

Strengths

The fund combines active management with ETF structure while seeking exposure representative of the broad Japanese equity market. Its product features specifically highlight Fidelity sustainable and fundamental research, company exclusions tied to certain activities, and an ESG tilt within an Article 8 framework. It also has stated ongoing charges of 0.25% on the share class. The strategy keeps close alignment with the MSCI Japan Index while still allowing active stock selection and non-benchmark positions.

Risks

The Key Information Document classifies the fund in risk class 4 out of 7, described as a medium risk class, reflecting potential medium-level losses from future performance and sensitivity to poor market conditions. Because the portfolio is primarily Japanese equities and had 99.0% exposure to Japan at 31 August 2026, returns are driven largely by the Japanese equity market and the concentration of exposure in one country. The documents also name currency risk, noting that investors may receive payments in a different currency, and liquidity risk. The fund may use derivatives for efficient portfolio management and currency hedging, and the documents also warn that the focus on securities with sustainable characteristics may affect performance unfavourably relative to similar funds without that focus; sustainable characteristics may change over time.