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Diversify Income in This Higher-For-Longer Regime With Real Estate

BY | ETF Database
10:07 am ET 09/08/26 | 9 VIEWS
Today’s higher-for-longer interest rate regime calls for income diversification. As investors assess the various opportunity sets for attractive yields in the current environment, they may not have yet considered real estate. Accordingly, the Fidelity Real Estate Income ETF (FREI) offers a solution that’s befitting from current macroeconomic conditions. FREI represents one of Fidelity’s latest ETF share classes, which allow investors two access points to the same underlying portfolio and historical track record as the established Fidelity Real Estate Income mutual fund (FRIFX). They can invest in the fund via an ETF or the aforementioned mutual fund.Key Takeaways: FREI gives investors two access points via an ETF or the original mutual fund (FRIFX) to an established, multi-asset real estate strategy. Rather than relying purely on standard equity REITs, the fund seeks higher-than-average income by actively allocating capital across REIT common and preferred stocks, real estate debt securities, and commercial mortgage-backed securities. By using bottom-up fundamental analysis to select foreign and domestic holdings, FREI systematically filters for attractive yields while providing a buffer against single-sector volatility. See More: Fidelity Debuts Its First ETF Share ClassesIncome First, Growth SecondFREI seeks higher-than-average income as its primary goal, with capital growth as a secondary investment objective. To achieve this, FREI invests in debt and income-producing equity securities of companies that operate within the real estate industry and its ancillary sectors. As opposed to relying on standard REIT stocks, FREI’s multi-asset approach allocates capital across preferred and common stocks of real estate investment trusts (REITs), real estate debt securities, and commercial mortgage-backed securities (CMBS). To extract maximum yield, the portfolio maintains a strategic emphasis on lower-quality debt securities such as high-yield debt or junk bonds. Additionally, the fund’s portfolio managers evaluate opportunities across both domestic and foreign issuers.Rigorous Fundamental SelectionRather than passively tracking an index that exposes investors to the most expensive stocks using a market-cap weighted approach, FREI uses an actively managed strategy driven by fundamental analysis. Portfolio managers evaluate each issuer’s financial condition, industry standing, and broader economic backdrop to construct a highly curated portfolio that offers risk-adjusted yield. Combining preferred equity, common stock, and high-yield real estate debt provides a buffer against single-sector volatility while also maintaining stable cash flows. Whether accessed via its original mutual fund vehicle or its ETF share class structure, FREI provides a flexible mechanism to capitalize on real estate yields for income seekers in this higher-for-longer inflationary environment. For more news, information, and analysis, visit the ETF Investing Content Hub. Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles. 1280160.1.0

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