Daily ETF Watch: 3 New Fidelity Funds

October 09, 2014

The legendary Boston money management firm continues its push into ETFs.

Fidelity Investments, the Boston-based money management firm making a concerted push into the world of exchange-traded funds, today is continuing that effort by launching three actively managed bond ETFs. These are Fidelity’s first active ETFs, and fixed income is one area of the still-small active ETF market that has shown true signs of life.

The three ETFs going live today, each of which has an annual expense ratio of 45 basis points, or $45 for each $10,000 invested, are as follows:

  • Fidelity Total Bond ETF, which will trade with the ticker “FBND”
  • Fidelity Limited Term Bond ETF, which will trade with the ticker “FLTB”
  • Fidelity Corporate Bond ETF, which will trade with the ticker “FCOR”

Just 1 percent of the nearly $1.9 trillion that is now invested in U.S.-listed ETFs is in active strategies, but three-fourths of those active ETF assets are invested in bond ETFs, meaning Fidelity is now entering a relatively prospective pocket of the ETF world. Fidelity said today in a press release that the depth of its research teams is likely to give investors a solid chance at outperforming relevant benchmarks.

It’s a challenging time for fixed-income investors, given the ultra-low bond yields that have prevailed since the subprime mortgage crisis in 2008 and 2009, and the nagging sense that bond yields may have begun to grind higher after more than 30 years of moving lower. Indeed, it there ever was a time when active managers could show off their chops, it’s right now and it’s in fixed income.

14 ETFs And Counting

With today’s launches, Fidelity’s lineup of ETFs grows to 14 funds. Ten of those pre-existing funds are the cheapest-available U.S. sector equity securities, and its 11th and oldest is its Nasdaq 100-tracking Fidelity Nasdaq Composite Tracking Stock ETF (ONEQ | A-55). ONEQ, which now has almost $400 million in assets, was launched in 2003 and remained the firm’s only ETF for about 11 years.

That said, Fidelity has signaled that its long-awaited move into ETFs is likely to be thoughtful, varied and, in the end, substantial. As an example, it has an agreement with BlackRock’s iShares, the world’s biggest ETF company, to collaborate on indexed ETF strategies, and it offers dozens of iShares ETFs commission-free on Fidelity’s extensive trading platform.

Indeed, the Boston-based firm made into a household name a generation ago by dint of Peter Lynch’s success as the manager of the Fidelity Magellan equities fund, looks to be exceedingly well positioned for the next big phase of the development in the 21-year-old ETF industry; namely, distribution.

 

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