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Fidelity launches first range of passive ETFs
25 October 2013
Started trading yesterday on the NYSE. Fidelity awaits approval from SEC for five active fixed income ETFs
Fidelity Investments has launched its first suite of passively-managed exchange traded funds (ETFs).
The firm claims the ten funds will be the cheapest passive ETFs in the industry with total expense ratios of 0.12%. According to Fidelity this makes the cost of the funds almost 80% below the industry average for this kind of ETF.
This is a big move for Fidelity, which until now has resisted making a big move into the growing ETF sector. It launched its first and only ETF ten years ago.
Its new ETFs track the major equity sectors including financials, energy and healthcare. The funds started trading on October 24 on the New York Stock Exchange.
Fidelity’s roots lie in mutual funds, so the ETF suite will enable the firm’s investors to have access to passively-managed funds as well as actively-managed funds.
“Since the financial crisis five years ago, investors and advisors have told us that they are looking for additional ways to diversify their portfolios and get exposure to specific industries outside of the typical cap-weighted or style specific options such as large or small cap, or growth and value,” said Anthony Rochte, president of SelectCo, the company’s dedicated sector investing division.
“Our new passive sector ETFs can provide for that diversification, serving as building blocks to help investors and advisors find new ways of generating alpha through asset allocation and better manage portfolio risk.”
Fidelity said it is also creating sector-specific micro sites to make it easier for investors and advisors to learn more about the growing field of sector investing.
“It’s not enough to just provide new products today,” said Ram Subramaniam, president of Fidelity Brokerage. “To help our 10 million brokerage customers better understand sectors and make more informed investment decisions, we knew we needed to develop a world-class sector platform that brings together investment insights, research, education and highly customizable screeners for finding sector stocks, ETFs and mutual funds.”
Fidelity has hired BlackRock as sub-adviser for the 10 ETFs, using the firm’s passive investment management capabilities and scale.The firm decided to use MSCI as benchmark provider.
Deborah Fuhr, partner and co-founder of research and consultancy firm ETFGI, told Global Investor/ISF: "Fidelity's new suite of ETFs is a significant development for them, the industry and investors. Fidelity has a strong global brand and global distribution covering institutional investors, financial advisors and retail investors.
"This will allow them to offer their own ETFs on their on-line platforms where they have been historically offering other providers ETFs on their platforms in the us and the uk."
The asset manager is also pending approval from the US Securities and Exchange Commission to launch five actively-managed fixed income ETFs.