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Journal of Indexes

Fidelity Launches First ETF

Related ETFs: ONEQ | IBB
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Fidelity Launches First ETF Mutual fund giant Fidelity Investments entered the burgeoning exchange-traded funds (ETF) industry with the introduction of an exchange- traded fund based on the Nasdaq Composite Index. The ETF began trading in early October on Nasdaq under the symbol ONEQ. Fidelity also launched a traditional index fund tied to the Nasdaq Composite Index.

"This is a significant milestone for us as it marks the first time Fidelity will sponsor and manage an ETF," said Sanjiv Mirchandani, Fidelity Investments' executive vice president of Brokerage and Asset Management Products. "In recent years, ETFs have been among the fastest gro w i n g p roducts in the financial services industry, and our bro kerage customers have taken advantage of the variety of externally managed ETFs we've made available to them."

The Nasdaq Composite Index, which was introduced in 1971, measures approximately 3,400 domestic and international Nasdaq-listed stocks. The top five industry groups and their weights include Computer S o ft w a re & Hard w a re, 54%; Health Care, 13%; Financials, 11%; Consumer Discretionary, 8%; and Telecommu- nications & Media, 6%, with other groups making up 8% of the index as of August 31, 2003.

This will be the third ETF based on a Nasdaq stock index and more could be on the horizon, said John Jacobs, CEO of Nasdaq Financial Pro d u c t s Services.

"There are a variety of sectors and other market segments that are untouched for us," said Jacobs.

"ETFs have been growing in popularity, providing investors with convenient and cost-effective equity exposure," said Deborah Fuhr, executive director of global ETF research at Morgan Stanley.

The wildly popular Nasdaq 100 "cubes" (QQQ) is one of the largest ETFs, and is frequently the most actively traded stock in the U.S. on any given day. The Nasdaq 100, introduced in 1985, contains the 100 largest nonfinancial stocks listed on the tech-heavy exchange. The Nasdaq Composite can be thought of as a diversified growth index, while the Nasdaq 100 is large-cap growth. The iShares Nasdaq Biotechnology (IBB) is the other Nasdaq ETF.

"The new Fidelity Nasdaq Composite ETF will likely start off like QQQ, with a large institutional following, and then migrate to being a predominantly retail product," said Jacobs. "The investors in QQQ represent the full spectrum-with retail and institutional buy and hold investors, as well as active traders."

 

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