Fidelity Converting $13.5B in Mutual Funds to ETFs

Fidelity Converting $13.5B in Mutual Funds to ETFs

Six active funds to transition as firm massively expands fund transition strategy.

RonDay
|
Managing Editor
|
Reviewed by: Lisa Barr
,
Edited by: Lisa Barr

Fidelity Investments is converting six mutual funds holding $13.5 billion in assets into exchange-traded funds, a quantum leap from its previous transition, as the move toward the more flexible exchange-traded format accelerates. 

Boston-based Fidelity, which manages $4.2 trillion and is the world’s fourth biggest asset manager, is converting a batch of actively managed funds, which charge higher fees and are growing in popularity as investors seek returns that beat broad markets. 

Fidelity converted $427 million into ETFs this month under a plan announced in November, and this latest $13.5 billion batch represents a massive expansion of its strategy. ETFs are widely seen as having liquidity, tradability and tax advantages over mutual funds, and have been adding assets while mutual funds are shedding them. 

“Conversions represent one option for traditional mutual fund managers to enter the faster growing ETF space,” CFRA’s Head of ETF Data and Analytics Aniket Ullal told etf.com in an email. “While conversions will accelerate the growth of ETFs at the expense of traditional mutual funds, the latter will continue to be important in areas such as defined contribution plans, where traditional funds are still dominant.” 

Around $71 billion in mutual funds have switched over into exchange-traded funds since the first was done in 2021, Ullal said. That total may swell to $1 trillion over the next decade or so, Bloomberg ETF analyst Eric Balchunas has estimated. Asset managers including JPMorgan Chase & Co. and Dimensional ETFs are among companies that have swapped mutual funds into ETFs. 

 

Active Management 

Fidelity, with $35.9 billion held in 58 U.S.-traded ETFs, is also aiming at the rapidly growing actively managed field. Actively managed ETF inflows surged 45% in May to $8.4 billion, according to Morningstar. Flows into active funds made up about a quarter of all May ETF inflows, despite the category comprising about 5% of total exchange-traded fund assets. 

Fidelity will convert the following mutual funds, according to a filing:  

  • International Enhanced Index Fund (FIENX) will become Enhanced International ETF 
  • Large Cap Core Enhanced Index Fund (FLCEX) will become Enhanced Large Cap Core ETF 
  • Large Cap Growth Enhanced Index Fund (FLGEX) will become Enhanced Large Cap Growth ETF 
  • Large Cap Value Enhanced Index Fund (FLVEX) will become Enhanced Large Cap Value ETF 
  • Mid Cap Enhanced Index Fund (FMEIX) will become Enhanced Mid Cap ETF 
  • Small Cap Enhanced Index Fund (FCPEX) will become Enhanced Small Cap ETF. 

 

Contact Ron Day at [email protected] or follow him on Twitter at @RonDayETF  

Ron Day is Managing Editor at etf.com. He joined the company in October 2022 and previously served as editor and deputy managing editor.

Ron covered business and financial news at Bloomberg News for 20 years, working on the breaking news, technology, commodities, headlines and First Word teams. He was previously senior editor at ESG news outlet Karma Impact and filled the same role at Boundless Impact. He also covered a variety of beats at New Jersey daily papers including the Daily Record in Parsippany, the North Jersey Herald & News and the Asbury Park Press. Ron's freelance work has been published in AARP.com, Investopedia.com and BigThink.com.

Ron is an advocate and fan of literacy. He hopes to one day master his Telecaster, rather than the other way around. His wonderful family includes a 10-lb. malti-poo named Emmy.