FESM vs TMFS

FESMAFidelity Enhanced Small Cap ETF

TMFSFMotley Fool Small-Cap Growth 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.

TMFS The Motley Fool's stock-picking bench in an ETF wrapper: an actively managed basket of US small caps chosen for quality and growth, with no index to hide behind and a fee that reflects the human effort.

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.

TMFS The actively managed ETF seeks long-term capital appreciation by investing primarily in equity securities of small-capitalization companies. It uses a quality-growth approach and generally invests at least 80% of net assets in small-cap companies.

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.

• TMFS Genuinely active, not an index in disguise: managers pick US small caps on quality and growth, with at least 80% of net assets in small-cap companies per the prospectus.
• Trading since 2018, so there is a real multi-year live record from a named research house instead of a back-test.
• One legible job: US-listed equities only, small-cap quality-growth style, no overseas sleeve or mid-cap drift written into the mandate.

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%.

• TMFS The 0.85% expense ratio sits well above the median for active small-cap funds, and the highest-graded rivals in the group (AVUV, AVSC) charge a fraction of that.
• Thinly traded next to the category's giants, so spreads can be wider and bigger orders can push the price around.
• The mandate is capital appreciation, not income, and against its active small-cap peer group the fund lands in the bottom quartile on our review.

Full FESM profile⁠

Full TMFS profile⁠