Fidelity Converts 6 Mutual Funds to ETFs

Fidelity Investments today announced the launch of six new active exchange-traded funds that previously traded as mutual funds, in a further acceleration toward a more flexible exchange-traded format. 

The Boston-based firm, with $36 billion in ETF assets before the current conversions, also announced it chopped total expense ratios for its 13 equity factor ETFs in half, a move it said would save investors $6 million annually. 

As ETFs grow in popularity, asset managers are increasingly looking towards mutual fund conversions as one option to get the investment vehicles to market. By offering an ETF wrapper of popular mutual funds, firms can offer cheaper, more liquid versions of products they know investors are interested in.

The batch of actively managed ETFs will be commission-free and begin trading on Nov. 20, according to a press release, and is part of Fidelity’s plan announced in June to convert its actively managed Enhanced Index mutual fund suite. 

Fidelity Reaches 64 ETFs in Lineup

The suite includes small-, mid-, and large-cap equities, as well as an international fund, and expands Fidelity’s lineup to 64 ETFs. The enhanced ETFs will have expense ratios ranging from 0.18% to 0.28%.

“We listen to client demands very closely, and they like the ETF wrapper,” Greg Friedman, Head of ETF Management and Strategy at Fidelity, said in an interview. “It’s tax efficient, it’s lower cost, tradability to it, there is a transparency to it, so we think ETFs are going to continue to grow.”

About 40 mutual funds have been transformed since the first formal mutual-fund-to-ETF conversion by Guinness Atkinson in 2021, according to etf.com data.

Fidelity's largest fund is the Fidelity MSCI Information Technology Index ETF (FTEC) with $6.79 billion in assets.

Bloomberg Senior Analyst Eric Balchunas has predicted about $1 trillion in conversions over the next decade. 

Contact Lucy Brewster at [email protected].