FIDI's Struggle to Maintain Relevance in the Crowded Dividend ETF Market

The dividend ETF market has become a battleground for asset managers, with Fidelity's International High Dividend ETF (FIDI) increasingly struggling to retain its competitive edge. Despite delivering a robust three-year total return compound annual growth rate (CAGR) of 21.04% as of October 2025, according to FinanceCharts, FIDI's total assets under management (AUM) of $175.385 million pale in comparison to rivals like the Schwab Fundamental International Large Company Index ETF (FNDF), which commands $18.022 billion in assets. This gap underscores a broader challenge: FIDI's inability to scale amid a landscape dominated by cost-conscious investors and active strategies.

Cost Inefficiency Undermines Appeal

FIDI's 0.39% expense ratio, according to PortfoliosLab, is a critical liability in a market where investors increasingly prioritize low-cost options. For context, the Vanguard International Dividend Appreciation ETF (VIGI), a direct competitor, charges just 0.15%, a 58% discount to FIDI. While FIDI boasts a higher dividend yield (4.47% as of October 2025, per StockInvest) than VIGI's 1.91%, the cost differential erodes its advantage. Vanguard's dominance in this space-leveraging its brand reputation for low-cost indexing-has made it a default choice for passive investors seeking dividend exposure.

This cost inefficiency is further compounded by FIDI's underperformance relative to active peers. The iShares International Select Dividend ETF (IDV), despite a higher 0.49% expense ratio, according to a PortfoliosLab comparison, has outperformed FIDI year-to-date in 2025, gaining 34.11% compared to FIDI's 24.95%, as Morningstar reports. IDV's active strategy, which emphasizes profitability, cash flow, and volatility constraints, appears to resonate more in a market where investors are willing to pay a premium for curated risk management.

Strategic Divergence and Risk Profiles

FIDI's passive, market-cap-weighted approach to international high-dividend stocks contrasts sharply with the active screening methodologies of competitors. While this strategy limits exposure to struggling companies by focusing on larger, more stable firms, it also exposes the fund to sector concentration risks. For instance, FIDI's recent dividend growth rate of -8.76% over the past year suggests vulnerability to economic downturns or shifts in corporate payout policies-a stark contrast to its three-year growth rate of 22.39%.

Meanwhile, VIGI's focus on dividend appreciation-companies with a history of consistent payouts-offers a more defensive profile. This aligns with investor preferences for stability, particularly in volatile markets. FIDI's higher Sharpe Ratio (1.38) indicates superior risk-adjusted returns, but its volatility (2.47%) remains a concern for risk-averse portfolios.

Market Share and Investor Sentiment

FIDI's AUM struggles reflect broader investor sentiment. The SPDR S&P 500 ETF (SPY) alone holds $676.917 billion, illustrating the gravitational pull of large, liquid funds. FIDI's niche focus on international dividends-a sector prone to currency and geopolitical risks-further limits its appeal. Competitors like IDV and FNDF have capitalized on this by offering diversified, actively managed portfolios that mitigate such risks.

Moreover, FIDI's recent performance lags behind its five-year CAGR of 13.93%, which, while respectable, fails to excite investors in a market where alternatives like the iShares MSCI EAFE Value ETF (EFV) with $27.057 billion in AUM offer broader exposure.

Conclusion: A Market Shifting Against Passive High-Yield Strategies

FIDI's decline is emblematic of a larger trend: the erosion of passive high-yield strategies in favor of cost-efficient, active alternatives. As investors prioritize risk-adjusted returns and diversification, FIDI's higher expense ratio and volatility profile become liabilities. For Fidelity to reclaim its edge, a reevaluation of its indexing methodology and fee structure may be necessary. Until then, the dividend ETF space will likely remain a domain where active managers and low-cost innovators like Vanguard and Schwab reign supreme.