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One of 2025’s most notable equity market occurrences was the redemption story penned by international stocks. The MSCI EAFE Index gained 31.6%, handily outpacing the S&P 500 along the way, marking just the second time since 2020 the international gauge topped its domestic rival.
That resurgence is sparking renewed interest in international exchange traded funds (ETFs) – a logical response because, as advisors know, previous eras of international out-performance have been lengthy at times. The jury is still out as to whether or 2025 marks the start of one of those periods, but advisors have good reason to evaluate ETFs such as the Fidelity Enhanced International ETF (FENI).
The five-star rated Gold medal FENI has existed in ETF form since November 2023 and while that’s not a long track record, the $5.94 billion large-cap blend fund has made a habit of beating the MSCI EAFE Index over that span.
(Image: Morningstar)
Fidelity Enhanced International ETF: https://www.morningstar.com/etfs/arcx/feni/
iShares MSCI EAFE ETF: https://www.morningstar.com/etfs/arcx/EFA
Past performance doesn’t guarantee future returns, but it’s worth examining why the Fidelity Enhanced International ETF truly is enhanced while acknowledging the ingredients that could set it up for an extended run of beating pure beta rivals.
How FENI Enhances International Investing
Among this ETF’s favorable traits are its embrace of smaller, though not necessarily riskier large-cap stocks and an emphasis on companies returning cash to shareholders via buybacks and dividends. While that casts a value aura around FENI, flexibility allows the fund to lean into other factors.
“This strategy has also had more exposure to high-momentum stocks in recent years. Momentum approaches bet that rising stocks will continue to rise and that lagging stocks will continue to lag,” according to Morningstar. “Compared with category peers, the strategy also had more exposure to the Momentum factor in the most recent month.”
Some of that momentum is attributable to a 22.40% allocation to Japanese stocks – an asset class buoyed by the recent election of Prime Minister Sanae Takaichi. Advisors evaluating this Fidelity ETF should consider Takaichi’s pro-markets stance, which includes an emphasis on public-private investments across more than a dozen areas.
She’s also signaled a willingness to work with the Bank of Japan (BOJ) while extending the push to compel previously tight-fisted, cash-rich Japanese companies to expand their shareholder rewards schemes.
Beyond Japan, Germany – the ETF’s third-largest country exposure and the Eurozone’s largest economy – has unfurled massive monetary stimulus and significant boosts to defense spending. The latter point could augur well for the fund’s 20.16% weight to industrial stocks.
FENI Offers Value
FENI isn’t a value fund in the strictest sense, but has some value tendencies and those could be amplified at a time when international stocks remain discounted relative to U.S. peers.
“After underperforming in general for about 15 to 20 years, the rest of the world is still really undervalued in terms of their currencies and especially their stocks,” says Dirk Hofschire, managing director of Fidelity’s Asset Allocation Research Team (AART).
(Image: Fidelity, data as of Sept. 30, 2025)
Whether it’s Europe’s increased defense spending, the continent’s resurgent banks, Japan’s corporate reforms or other catalysts, it’s evident there are 2026 tailwinds for international equities. That doesn’t guarantee FENI will hit a home run, but those factors do imply the fund could be suitable for clients with long-term horizons looking to access the diversification benefits of ex-US stocks.
“It’s impossible to know in advance whether international stocks will have another banner year in 2026. Rather than trying to predict short-term returns, investors would do better to develop a thoughtful investment plan that’s tailored to their goals, time horizon, and risk tolerance,” concludes Fidelity.
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