Fidelity Investments has launched its first suite of factor-based ETFs: A type of smart beta funds that use multiple rules for their investments.
The ETFs feature “active design and passive implementation,” said Anthony Rochte, president of SelectCo, the company's dedicated sector investing and ETF services division. While not quite the same as having Fidelity Contrafund manager Will Danoff in a box, they're intended to deliver results similar to active strategies favored by fund managers.
The funds — Fidelity Core Dividend ETF (FDVV), Fidelity Dividend ETF for Rising Rates (FDRR), Fidelity Low Volatility Factor ETF (FDLO), Fidelity Momentum Factor ETF (FDMO), Fidelity Quality Factor ETF (FQAL), and Fidelity Value Factor ETF (FVAL) — will start trading on the New York Stock Exchange on or about Sept. 15.
“Fidelity has a long history of understanding what drives stocks,” said Joe DeSantis, chief investment officer in Fidelity's Equity division.
Fidelity's quantitative division has been working on the project since 2006. “They have been working on this for the better part of a decade,” Mr. DeSantis said.
The rules-based ETFs don't just consider one factor, such as low price-to-book value. They use additional rules to make sure the funds aren't overweight in any one sector or holding. “The are designed to maximize factor exposure and lower unintended bets,” Mr. DeSantis said.
The new ETFs will carry an expense ratio of 0.29%, in line with Fidelity's
generally aggressive ETF pricing. Fidelity investors will be able to buy the new ETFs commission-free on the company's brokerage platform. The
Boston-based fund giant has also filed with the Securities and Exchange Commission for actively managed ETFs.
Geode Capital will be the funds' subadviser. The company was an incubator company formed by Fidelity in 2001 and became a separate company in 2003.
