FESM vs SCAP

FESMAFidelity Enhanced Small Cap ETF

SCAPFInfrastructure Capital Small Cap Income ETF

In short

FESM A quant small-cap strategy that has been running since 2007 and moved into an ETF wrapper in 2023 with the same mandate. It nudges the Russell 2000 rather than copying it, and charges far less than the typical active small-cap fund.

SCAP Most small-cap funds ask you to wait for the payoff. SCAP goes looking for cash now: active small-cap value picks, preferreds and convertibles, covered calls and modest borrowed leverage, all funneled into a monthly payout.

Stated mandate

FESM The fund is a diversified U.S. equity strategy focused on small-cap companies. It seeks to outperform its benchmark through a quantitative process that balances risk and return.

SCAP The Fund seeks capital appreciation and income by investing primarily in small-capitalization companies. The adviser favors companies it views as relatively undervalued and having income qualities.

Why people hold it

• FESM Costs 0.28% a year, roughly half the median for active US small-cap ETFs. Cheap fuel for a strategy that only needs to beat its benchmark by a little.
• The strategy dates to 2007 as a Fidelity mutual fund and kept the same objective when it converted to an ETF in 2023. Long history, newer ticker.fidelity.com
• A multi-billion-dollar fund that trades actively, so getting in and out tends to be straightforward. One of the stronger builds in the active small-cap group.
• Spreads across roughly 600 small-cap names, so no single blowup dominates. This is a diversified core sleeve, not a concentrated stock-picker bet.

• SCAP Unusual plumbing for a small-cap fund: dividend payers plus preferred and convertible securities, a selective option-writing overlay and modest leverage, all pointed at income. Pays monthly.infracapfund.com
• Stock-picked, not index-cloned. The manager buys small-cap names it views as undervalued with income qualities, leaning on profitability and value, measured against a small-cap value benchmark.
• The active wrapper lets it own income sources a plain small-cap index fund cannot, and to size positions by conviction rather than market cap.infracapfund.com

Worth knowing

• FESM Small caps are the choppiest corner of the US market, and this fund lives there full time. Expect a bumpier ride than a large-cap core holding.fidelity.com
• Enhanced index means small tilts around the Russell 2000, not a break from it. Results track close to the index rather than looking dramatically different.fidelity.com
• Cheap, but not the cheapest in the room: top-rated peers AVSC and AVUV run 0.25% and DUHP 0.20%.

• SCAP Cost is the headline trade-off: a 2.20% expense ratio, versus 0.25% at AVUV and 0.29% at JPSE. Active management, an options desk and borrowing are not cheap to run.
• The income engine cuts both ways: borrowed money amplifies moves in either direction, and calls written on holdings trade away upside on those names for premium.infracapfund.com
• Small and thinly traded since its late-2023 launch, so spreads are a real cost and the record covers a short stretch of market weather.

Full FESM profile⁠

Full SCAP profile⁠