Active ETF Strategies for Enhanced Yield: The Fidelity Tactical High Income Fund's Resilient Approach

In an era of tepid economic growth and volatile markets, income-focused investors are increasingly turning to active ETF strategies to balance yield generation with capital preservation. The Fidelity Tactical High Income Fund (FTHI) exemplifies this approach, leveraging a diversified, tactically allocated portfolio to navigate uncertainty. With a recent CAD 0.0183 dividend per share and a strategic emphasis on high-income assets, FTHI offers a compelling case for investors seeking resilience in a low-growth environment.

Tactical Allocation: The Core of FTHI's Strategy

FTHI's active management team, led by co-managers Adam Kramer, Ford O'Neil, and Ramona Persaud, dynamically adjusts the fund's asset allocation to capitalize on market dislocations. As of May 31, 2025, the fund's portfolio is split into 43.68% equities, 50.34% bonds, and 5.04% preferred securities, with a small cash buffer. This structure allows the fund to pivot between sectors and geographies, prioritizing income while mitigating downside risk.

The fund's recent holdings underscore this flexibility. Top equities include tech giants like Microsoft and Apple, alongside energy and shipping sector plays such as DHT Holdings and Euronav. These selections reflect a strategic tilt toward sectors with durable cash flows and pricing power. Meanwhile, the bond portfolio features a mix of U.S. Treasuries (e.g., USTB 3.375% 08/15/42) and high-yield corporate debt (e.g., GANNETT HOLDING 6% 11/26 144A), balancing safety with yield.

Diversified Income in Action

FTHI's recent CAD 0.0183 dividend highlights its ability to generate consistent income. This payout, combined with a weighted average dividend yield of 2.20%, positions the fund as a competitive option for income seekers. The fund's diversified approach—spanning equities, bonds, and preferred securities—ensures that it can adapt to shifting interest rate environments and sector-specific risks.

For instance, the fund's exposure to U.S. Treasury securities provides a stable anchor, while its high-yield corporate bonds (e.g., ALBERTSONS CO 4.875% 2/30 144A) offer elevated returns. The inclusion of technology and financial sector equities further diversifies earnings streams, reducing reliance on any single market segment.

Active Management: A Key Differentiator

FTHI's active management is a cornerstone of its strategy. With a turnover ratio of 221.4%, the fund frequently rebalances its holdings to exploit emerging opportunities. This agility was evident in its recent outperformance: a 4.02% total return in the trailing one-month period, outpacing the S&P/TSX 60 Index Total Return of 13.80%. Such performance underscores the value of tactical positioning in volatile markets.

The fund's co-managers also emphasize global diversification, with investments in Canadian equities (via the S&P/TSX 60 Index benchmark) and international fixed-income instruments. This cross-border approach allows FTHI to tap into undervalued markets while hedging against regional downturns.

Investment Case for Uncertain Markets

For income-focused investors, FTHI's strategy offers several advantages:
1. Resilience Through Diversification: By blending equities, bonds, and preferred securities, the fund reduces exposure to sector-specific shocks.
2. Active Yield Capture: High-yield corporate bonds and dividend-paying equities enhance returns without excessive risk.
3. Global Flexibility: The fund's ability to pivot between U.S., Canadian, and international markets ensures it can capitalize on global opportunities.

However, investors should consider the fund's moderate expense ratio and the risks inherent in active management, such as tracking error and liquidity constraints.

Conclusion: A Tactical Play for Income-Seeking Portfolios

In a low-growth environment, FTHI's active ETF strategy provides a roadmap for generating enhanced yield without sacrificing resilience. Its recent CAD 0.0183 dividend, tactical allocation, and diversified holdings make it a compelling choice for investors seeking to navigate market uncertainty. As central banks remain cautious and economic growth remains uneven, FTHI's balanced approach offers a pragmatic solution for those prioritizing income and capital preservation.

For those willing to embrace active management, FTHI demonstrates that tactical allocation and diversified income strategies can thrive even in challenging markets.