Fidelity launches cheaper line of ETFs

New line of funds aimed at undercutting rivals

Oct 22, 2013 @ 4:09 pm

By Megan Durisin

Fidelity Investments is set to make a splash with its first attempt at entering the exchange-traded fund market with sector ETFs that undercut rivals Vanguard Group Inc. and State Street Global Advisors on price.

Fidelity plans to launch 10 sector ETFs, covering all the major sectors, on Thursday that cost just 12 basis points each, according to a filing with the Securities and Exchange Commission. Vanguard and State Street charge 14 basis points and 18 basis points, respectively, for similar ETFs.

Offering the cheapest sector ETFs on the market is a way for Fidelity to gain traction, said Mike Rawson, analyst at Morningstar Inc.

“They're not just trying to grab assets fast,” he said. “If they were going to come out at a high price point, forget about it. If they come out at a low price point like what they're doing… it gives it something to recommend them by.”

The low-price point also shows Fidelity is serious about competing this time around, Mr. Rawson said.

“Over time, they're probably going to launch additional products at low price points,” he said. “This is just one step in a long process.”

Fidelity launched its first ETF, the $262 million Fidelity Nasdaq Composite Tracking Stock ETF (ONEQ) in 2003, but seemingly gave up on ETFs until recently.

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