Fidelity Investments, among the world’s biggest mutual fund issuers, is following the lead of other firms taking steps as rival exchange-traded funds grow in popularity.
Fidelity is converting six mutual funds into actively managed thematic ETFs, the company announced in a press release on Wednesday and Securities and Exchange Commssion filing. The funds are expected to convert in June.
The six funds include the following, though their new tickers and expense ratios are not included in the filing:
- Fidelity Disruptive Automation ETF
- Fidelity Disruptive Communications ETF
- Fidelity Disruptive Finance ETF
- Fidelity Disruptive Medicine ETF
- Fidelity Disruptive Technology ETF
- Fidelity Disruptors ETF
At least a dozen mutual funds have converted to ETFs this year, featuring brand names like Dimensional, JPMorgan and Neuberger Berman among others. The first-ever mutual-fund-to-ETF conversion took place in March 2021 when Guinness Atkinson relaunched two of its mutual funds as the SmartETFs Dividend Builder ETF (DIVS) and the SmartETFs Asia Pacific Dividend Builder ETF (ADIV). Dimensional Funds and Motley Fool followed with their own conversions later in the year.
“A growing number of investors are seeking the tax efficiency, trading flexibility and potential cost efficiency benefits of ETF vehicles,” Fidelity’s Head of ETF Management & Strategy Greg Friedman said in the press release.
The converting Fidelity funds have just under $80 million in assets under management. The six thematic funds are each managed by the same team of eight managers since inception, and those managers will retain their roles post conversion: Niamh Brodie-Machura, Camille Carlstrom, Tim Codrington, Charlie Hebard, Michael Kim, Christopher Lee, Fahim Razzaque and William Shanley.
The prospectus for the funds notes that Fidelity looks for companies that may surpass the established players in certain industries. The managers use fundamental analysis to consider companies’ financial conditions and industry positions while also evaluating the overall market and economy to select holdings via a quantitative process. Companies included in the portfolios can be drawn from either the growth or value categories as well as both domestic and foreign markets.
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