Fidelity's First Sector ETFs Roll Out

October 24, 2013

ONEQ gets 10 companions as the firm behind the Magellan Fund starts its move into 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, today launched the 10 U.S.-focused sector ETFs it put into registration last summer, and they’ll be cheaper than competing lineups of ETFs offered by State Street Global Advisors and Vanguard.

Each of the Fidelity sector funds will have an expense ratio of 0.12 percent, or $12 for each $10,000 invested. Vanguard comes in with expense ratios ranging from 14 basis points to 19 bps, while SSgA's industry-leading “Select Sector SPDR Fund” family is priced at 18 basis points.

The new ETFs will become part of a pre-existing family of sector-focused active mutual funds. Total assets in the sector unit amount to $56 billion in 44 funds, according to Tony Rochte, a Fidelity executive who heads SelectCo, a Denver-based unit of Fidelity's that is focused on sector- and industry-specific strategies, whether active or passive, or whether in mutual fund or ETF wrappers.

"Post crisis, the interest in sector investing has accelerated," Rochte said today in a telephone interview, touching on a reason Fidelity chose to bring out sector ETFs first as it begins a major push into exchange-traded funds.

"The category has grown more than 77 percent since 2009," he said, quoting research that includes inflows and market movement.

Fidelity has made plain in regulatory filings over the past 18 months that it will make a big and concerted push into active as well as indexed ETFs. A partnership it penned with BlackRock on index ETFs and index sector funds betrayed a shrewdness as to how the Boston-based company made famous in the 1980s by the Fidelity Magellan fund might limit 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 (ONEQ | B-68) has $262 million in assets.

ONEQ and the 10 new sector ETFs will join 65 existing iShares ETFs that Fidelity customers can trade on the company's platform commission-free, making it one of the broadest commission-free platforms in the world of ETFs. Companies like Schwab and Vanguard offer commission-free ETF trading, as do online brokerages such as Etrade and TD Ameritrade.

The 10 proposed Fidelity funds and their tickers on NYSE Arca will be as follows:

  • Fidelity MSCI Consumer Discretionary Index ETF­­ ­– FDIS
  • Fidelity MSCI Utilities Index ETF – FUTY
  • Fidelity MSCI Consumer Staples Index ETF – FSTA
  • Fidelity MSCI Energy Index ETF – FENY
  • Fidelity MSCI Financials Index ETF – FNCL
  • Fidelity MSCI Health Care Index ETF – FHLC
  • Fidelity MSCI Industrials Index ETF – FIDU
  • Fidelity MSCI Information Technology Index ETF – FTEC
  • Fidelity MSCI Materials Index ETF – FMAT
  • Fidelity MSCI Telecommunications Services Index ETF – FCOM

The rollout of the 10 funds is the first tangible piece of an alliance with BlackRock, the parent of the world's biggest ETF firm iShares. As it stands, BlackRock is serving as subadvisor on the 10 new sector ETFs.

Fidelity also put five active fixed-income funds into registration earlier this year, including:

But the firm has yet to file for any active equities ETFs, an initiative that would likely be spearheaded by its equity-investment division, unless those active equity ETFs were sector funds. In that case, the Rochte-headed SelectCo would shepherd those funds to market.

 

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