Why We Upgraded This Fidelity Equity Fund to Gold

Increased confidence in Fidelity Equity-Income’s FEQIX manager, Ramona Persaud, drove a People Pillar upgrade to High from Above Average, boosting its Morningstar Medalist Rating to Gold from Silver.

Persaud has climbed up the ladder since joining Fidelity in 2003. She managed sector funds and international dividend funds for more than a decade. She has worked on this fund since late 2011 and took over as the lead at the start of 2018. Persaud continuously strives to improve by regularly reviewing how she executes her process, no matter how strong or weak the fund’s performance has been. She is not stuck on a certain way of doing things and is willing to adapt.

Under Persaud’s watch, the fund has delivered solid capital appreciation and downside protection. It has also outperformed the large-value Morningstar Category average and Russell 1000 Value Index by 1 percentage point per year since she took over. Persaud makes all portfolio decisions but also draws on a deep and experienced team of roughly 60 US equity analysts, as well as quantitative analysts and managers dedicated to Fidelity’s value and equity-income efforts.

Key Morningstar Metrics for Fidelity Equity-Income

Morningstar Medalist Rating: Gold

Process Pillar: Above Average

People Pillar: High

Parent Pillar: Above Average

Increased Portfolio Concentration and Rich Valuations Raise Concerns

FlexShares Quality Dividend ETF’s QDF concentration in sectors and individual holdings courts return volatility and led to a Process Pillar downgrade to Average from Above Average, dropping the exchange-traded fund’s Medalist Rating to Neutral from Silver.

The large-value strategy tracks the Northern Trust Quality Dividend Index, which selects dividend-paying constituents from the Northern Trust 1250 Index. Owing to the nature of that index, this ETF’s portfolio has about 30% of its assets in technology stocks, about triple the Russell 1000 Value Index’s stake. As a result, stocks from the financials, energy, and healthcare sectors have less influence on this portfolio.

The strategy is also concentrated in its top holdings: Apple AAPL, Microsoft MSFT, Nvidia NVDA, Meta Platforms META, and Alphabet GOOGL claim 27% of the portfolio. Many of those holdings are not in the Russell 1000 Value and sport rich valuations, which can lead to boom-or-bust results against that benchmark and make FlexShares Quality Dividend ETF look more like a large-blend fund.

Key Morningstar Metrics for FlexShares Quality Dividend ETF

Morningstar Medalist Rating: Neutral

Process Pillar: Average

People Pillar: Average

Parent Pillar: Average

Lead Manager’s Departure Drives People Downgrade

Eaton Vance removed lead manager Andrew Sveen from Eaton Vance Floating-Rate Advantage EIFAX and a couple of other funds in January 2025, resulting in a People downgrade to Above Average from High and dropping the I shares’ Medalist Rating to Neutral from Bronze. Sveen, who also served as the head of floating-rate loans and chairman of Morgan Stanley’s fixed income division, will leave the firm in May. Peter Campo, who had served as head of Goldman Sachs’ high-yield and floating-rate team and, before that, worked at Eaton Vance for 15 years, will take over Eaton Vance’s bank-loan platform at the end of April. It is unclear whether Campo will join this strategy’s management team.

Despite Sveen’s sudden departure, we remain confident in remaining comanagers and bank-loan veterans Ralph Hinckley and Jake Lemle. More than 20 people on the bank-loan research team still support the managers.

Key Morningstar Metrics for Eaton Vance Floating-Rate Advantage

Morningstar Medalist Rating: Neutral

Process Pillar: Above Average

People Pillar: Above Average

Parent Pillar: Average