Fidelity’s newest ETFs are the cheapest among the growing lineup of cryptocurrency equity and metaverse funds, bringing the broader fee war in the industry to two nascent thematic spaces.
The Fidelity Metaverse ETF (FMET) and the Fidelity Crypto Industry and Digital Payments ETF (FDIG) debuted on the Nasdaq Thursday, each charging an expense ratio of 0.39%.
Both funds track Fidelity-built indexes with no limits on where companies are based.
The 39-basis-point price tags set a new low for pricing among ETFs that track the metaverse and crypto industry equities. Other metaverse funds in the U.S. charge between 58 and 75 basis points, while crypto equity funds range from 45 to 89 basis points, according to FactSet data.
FDIG even beats the 47 basis points BlackRock is due to charge when it debuts its own crypto equity fund at some point in the near future.
Greg Friedman, Fidelity’s head of ETF management and strategy, said the asset manager began developing the funds after receiving interest from investors and advisors. In particular, clients were questioning whether it made more sense for them to have exposure to the concept of cryptocurrencies through related equities or by acquiring currencies directly.
Price & Differentiation
Friedman said the asset manager isn’t looking at drawing customers by offering exposure at a discount to its rivals in the thematic space.
“These products are priced [at] what we think is fair based upon what we have in terms of intellectual capital and our costs to produce,” he said. “When we launch funds, it’s not around price and [to] see how we can undercut. That's not our game.”
The two funds are entering developing themes that have yet to find much differentiation.
The Volt Crypto Industry Revolution and Tech ETF (BTCR), First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT), VanEck Digital Transformation ETF (DAPP), Grayscale Future of Finance ETF (GFOF) and Defiance Digital Revolution ETF (NFTZ) have securities overlaps of between 43% and 79%, according to analysis from ETF Logic, and their prices correlate at between 90% and 99%.
ETFs with the word “metaverse” in their names were less likely to have stock overlap with funds sharing securities at a rate between 17% and 64%, but their prices correlated at between 92% and 99%.
Scott O’Reilly, Fidelity’s head of index, sector, international and factor products, said the tight correlations could diverge over time based on the performance of individual companies and potential differences in how indexes and managers weight various subindustry groups.
“I think you'll find that over six, 12, 24, 36 months, we'll have a lot of variance between the strategies from a return perspective,” he said.