The fund company’s partnership with BlackRock begins taking shape with the registration of 10 index-based U.S. sector ETFs.
Fidelity Investments, the legendary fund company that has signaled in the past year it plans to dive head-first into the world of ETFs, put 10 index-based sector ETFs into registration—the first sign that the partnership it formed with BlackRock covering indexed and indexed sector strategies is taking shape.
Any comprehensive family of Fidelity sector funds will clearly compete head-to-head with the industry-leading “Select Sector SPDR Fund” family from State Street Global Advisors. But the plan also begs the question of what BlackRock’s iShares unit might do with its own sector ETFs to the extent that promoting its own products might undermine one of the cornerstones of its partnership with Fidelity.
Fidelity has made plain in regulatory filings over the past 18 months that it will make a big and concerted push into both active and indexed ETFs. Moreover, the partnership with BlackRock betrayed a shrewdness as to how the Boston-based company made famous in the 1980s by the Fidelity Magellan fund might limit—even obviate—the disadvantages of being a laggard in the ETF realm.
Fidelity does have a presence in the ETF industry, but it's just one fund that came to market almost 10 years ago. The Fidelity NASDAQ Composite Tracking Stock ETF (NasdaqGM: ONEQ) does have almost $300 million in assets, but that's it.
The 10 proposed Fidelity funds, which, as the names suggest, will be organized around MSCI indexes, are as follows:
- Fidelity MSCI Consumer Discretionary Index ETF
- Fidelity MSCI Utilities Index ETF
- Fidelity MSCI Consumer Staples Index ETF
- Fidelity MSCI Energy Index ETF
- Fidelity MSCI Financials Index ETF
- Fidelity MSCI Health Care Index ETF
- Fidelity MSCI Industrials Index ETF
- Fidelity MSCI Information Technology Index ETF
- Fidelity MSCI Materials Index ETF
- Fidelity MSCI Telecommunications Services Index ETF
The Fidelity filing included neither tickers nor proposed annual expense ratios.
“Fidelity is entering a very crowded market,” Todd Rosenbluth, and ETF analyst at S&P Capital IQ said in a telephone interview, referring to both SSgA’s Select Sector family and another suite marketed by Vangard.
Rosenbluth said he was surprised that Fidelity hasn’t yet moved more aggressively into the active ETF space.
The firm did put two active fixed-income funds into registration, the Fidelity Mortgage Securities ETF and the Fidelity Corporate Bond Exchange Traded Fund, but has yet to file for any active equities ETFs.
"We'll see what they decide to go live with and when they decide to go live," Rosenbluth said.