Fidelity: 'No plans' to expand ETFs

Even as ETFs continue to take market share away from mutual funds and gain more popularity with retail investors and advisers, officials for Fidelity Investments are maintaining that the fund giant is unlikely to expand its proprietary exchange traded fund lineup.
AUG 21, 2009
Even as ETFs continue to take market share away from mutual funds and gain more popularity with retail investors and advisers, officials for Fidelity Investments are maintaining that the fund giant is unlikely to expand its proprietary exchange traded fund lineup. “We have no current plans to expand proprietary ETFs,” Fidelity spokesman Vin Loporchio said shortly after the firm's president, Rodger Lawson, said in published reports that the company did not make a run at iShares earlier this year while the ETF behemoth was for sale. Fidelity is forgoing a growing market segment: Investors bought more ETFs in the first half of this year than in the same time period in 2008, according to Strategic Insight Mutual Fund Research and Consulting LLC of New York. In the first six months of 2009, ETFs had net inflows of $35 billion, compared with $26 billion in the first half of 2008, Strategic Insight reported. At the same time, investors pulled $49 billion more out of mutual funds than they put in. And assets in the $550 billion ETF sector are expected to surpass $1 trillion in less than three years, according to a recent report from Strategic Insights. While ETFs theoretically represent a competitive threat to Fidelity, the company is well-positioned to live without them, said Matthew Noll, senior credit officer at Moody's Investors Service of New York. “The diversification benefit of Fidelity's brokerage platform, to a small degree, mitigates the competitive threat because they distribute these products and receive brokerage revenues and distribution fees for the distribution of ETFs,” he said. Fidelity offers the Fidelity Nasdaq Composite Index Tracking Stock (ONEQ) which tracks the Nasdaq, and hundreds of other providers' ETFs on its platform. The decision not to take the leap into the ETF market is not a surprise, said John Bonnanzio, editor of the Fidelity Insight newsletter, which is based in Wellesley Hills, Mass. “They have had more than enough time to make a decision to get into that business,” he said. “I think what they have decided is that they don't want to compete with themselves in that way.” Fidelity recognizes that continued growth will come from the performance of its actively managed lineup, he said. In fact, Fidelity this week reported that its mutual funds had outperformed 75% of their peers year-to-date through June 30, citing data from Morningstar Inc. of Chicago and the New York-based research firm Lipper Inc. The performance represented a turnaround from last year, when only 56% of its funds outperformed their peers for the entire year, Fidelity officials noted. Fidelity's equity funds in particular posted an improvement in performance. Through June 30, the firm's stock funds had beaten 64% of their peers, up from last year when the funds beat only 36%, Fidelity reported. In addition, 70% of Fidelity's stock funds are beating their benchmarks year-to-date through July 31 and 83% of its sector funds are beating their benchmarks, the firm reported. “The way to make their mark is by coming up with top-tier funds as far as performance,” Mr. Bonnanzio said. “But I'm sure Fidelity recognizes that half of a year is not a full data point.” “Our three- and five-year performance numbers are rising as well,” Mr. Loporchio said. “In the past four years we have continued to build out and enhance our investment organization, and in particular, the equity research capabilities. We think we are well-positioned for growth.”

Latest News

Voya expands advisor managed accounts to add private market assets
Voya expands advisor managed accounts to add private market assets

Voya Financial adds private equity, credit and real estate options to its AMA program, building on support for looser federal investment rules in retirement accounts.

With executives leaving, Osaic’s Reid now in the spotlight
With executives leaving, Osaic’s Reid now in the spotlight

Shannon Reid, president of Osaic and the network’s number two executive, has plenty of challenges, industry executives said.

Investors sue crypto fund and platform, alleging $1.5 million never returned
Investors sue crypto fund and platform, alleging $1.5 million never returned

Auditors flagged the commingling. The COO allegedly knew. Investors kept getting the pitch

Wells Fargo nabs $1.7B RBC advisor team, loses two teams to LPL
Wells Fargo nabs $1.7B RBC advisor team, loses two teams to LPL

The advisors on the move include two brothers leading a family practice in Connecticut, and a husband-and-wife tandem working with business owners in the West Coast.

Most potential business successors think there's a plan – but owners say otherwise
Most potential business successors think there's a plan – but owners say otherwise

Business owners and their heirs may be making assumptions instead of having conversations, creating challenges for succession planning, according to new research.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.