Workers with a retirement account with Fidelity – the largest 401(k) provider nationally – have a new set of exchange-traded funds (ETFs) to invest through.
The asset manager is aggressively expanding its ETF ranks, converting half a dozen of its mutual funds to ETFs. The new active ETF products include the Fidelity Enhanced Large Cap Core ETF (FELC), Fidelity Enhanced Large Cap Growth ETF (FELG), Fidelity Enhanced Large Cap Value ETF (FELV), the Fidelity Enhanced Mid Cap ETF (FMDE), Fidelity Enhanced Small Cap ETF (FESM), and the Fidelity Enhanced International ETF (FENI). Each of these newly-minted ETFs began life as mutual funds back in 2007.
The addition of the six new funds brings Fidelity’s total ETF suite to a stunning 64 total listed funds.
“Fidelity has shown strong commitment to being a leading provider of actively managed ETFs,” says VettaFi head of research Todd Rosenbluth. “They are using their scale to offer competitively priced ETFs and leveraging long-standing track records.”
The company says it is serving investors' demand for the product type.
“Fidelity is committed to offering investors innovative ETFs to meet their evolving needs, including active, passive, and factor strategies,” explains Greg Friedman, Fidelity’s Head of ETF Management and Strategy. “We continue to see demand for active ETFs as investors seek the potential for outperformance with the benefits of an ETF wrapper. Adding these six active equity ETFs can serve as core building blocks for investors to meet this need.”
Active ETFs Ascendant
Fidelity is just following a well-established trend in the investment world. In recent years, active ETFs have grown as investors move beyond the orthodoxy of passive investing that has characterized the space for decades.
For asset managers, tax-efficient ETF wrappers offer a streamlined vehicle to offer the same investment objectives. JP Morgan has switched a large number of its mutual funds to ETFs, as has Dimensional Fund Advisors.
Investors are also seeing the benefits. Lower management fees, little to no discounts on net assets value, and easier accessibility through exchanges form an active ETF’s trifecta of advantages, according to Financial Times' David Stevenson.
Using an ETF vehicle enables continuity with the preexisting mutual funds. For Fidelity, for instance, each of the six new ETFs will continue to be guided by its proprietary investment process and aim to beat benchmarks. Quantitative factors like growth, profitability, and historical valuations will continue to guide their stock selection.
The converted funds have relatively low management costs as compared to other active ETFs. FELC, FELG, and FELV will charge holders 18 basis points per annum, while FMDE will charge 23 basis points.
Both FESM and FENI carry an expense ratio of 28 basis points.
Fidelity also announced it had reduced the total expense ratios of its 13 equity factor ETFs by almost half.
This article was produced and syndicated by Wealth of Geeks.