Fidelity Freedom Index Series
A thoughtful approach at a low cost makes this a strong choice for target-date investors.
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Fidelity Freedom Index stands out for its robust, research-driven approach and deep global asset-allocation team. The series also comes at an extremely attractive price. It earns a Morningstar Analyst Rating of Silver across each of its three share classes.
A prudent approach to strategic allocations and glide paths is a hallmark of Fidelity's target-date lineups, including not only this series, but the firm’s other, more actively leaning, target-date offerings such as Freedom and Freedom Blend. The team has proved it will make sound, research-driven enhancements. In 2018, the team added the use of long-term U.S. Treasuries throughout the glide path, and more recently shifted the series' U.S./non-U.S. equity split from a 70/30 allocation to 60/40 in 2019. Both developments improved diversification, and subsequently, the series' resiliency during periods of market stress.
A trio of managers oversees this retirement offering. Andrew Dierdorf and Brett Sumsion have been at the helm together since 2014, while Finola McGuire Foley rounded out the team in June 2018. This group receives support from Fidelity's well-resourced global asset-allocation team, which currently sits at almost 50 investment professionals. A recent change at the top, with former managing director of research Bill Irving named the group's CIO in May 2020, should support the continued strength of this team.
This series only taps passive index funds, which contributes to lower costs, but the approach can also limit the series' ability to differentiate relative to similarly contoured but more nimbly constructed target-date offerings. For example, it restricts management's tool kit compared with more-active approaches that might incorporate tactical allocation or utilize underlying active strategies to enhance shorter-term returns. Despite these limitations, the series has delivered impressive results. Over the five-year period through 2020, each vintage's investor share class outpaced its respective S&P Target Date Index benchmark on a risk-adjusted basis (as measured by Sharpe ratio).
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