Fidelity Adds Active Funds To Its ETF Plans
Fidelity Investments, still firmly in the public’s imagination as the ultimate success story in the world of actively managed mutual funds, filed regulatory paperwork detailing plans to bring to market active ETFs, adding to its previously disclosed aim to launch index ETF strategies.
In the exemptive relief filing, the Boston-based company that still only has one ETF to its name, said the first active fund it is contemplating is the Fidelity Corporate Bond ETF, a security seeking “a high level of current income” that will invest at least 80 percent of its assets in investment-grade U.S. and foreign corporate credits.
The paperwork, filed on Friday, Dec. 7, follows by almost exactly one year a separate exemptive relief filing the company submitted to the Securities and Exchange Commission requesting broad permission to market index ETFs. Together the two filings provide a clear signal that Fidelity’s move into the vibrant world of exchange-traded funds is broad and ambitious.
The company behind the legendary Fidelity Magellan Fund and the Fidelity Contrafund further signaled its newfound seriousness earlier this year when it named longtime ETF industry veteran Tony Rochte to head up a new ETF operation called SelectCo.
Rochte had been a managing editor at Boston-based State Street Global Advisors, the No. 2 U.S. ETF company by assets after San Francisco-based iShares, the unit of BlackRock.
Did Fidelity Miss Out?
As things stand, the company has only one exchange-traded fund, the Fidelity Nasdaq Composite Tracking Stock ETF (NasdaqGM: ONEQ), which it rolled out in September 2003 and which has about $175 million in assets.
That launch was arguably quite timely, as rival fund companies—including the now-No. 3 ETF company The Vanguard Group—were barely yet in the business of marketing ETFs themselves.
But because Fidelity never followed ONEQ’s launch with rollouts of any other strategies, the company is now widely perceived as having missed out on the early phase of ETF development.
Industry movers worry ETF trading belies weak bond liquidity.
This week, the NYSE expects to hear from the SEC. What will it mean for ETF investors?
Our annual fixed-income conference is coming up in a little more than a week and I can’t wait.
When it comes to reinvesting dividends, mutual funds have ETFs beat.