Fidelity, BlackRock seek to expand dominance in ETFs

Firms set to launch actively managed accounts, a move likely to stoke competition.
MAY 08, 2014
Fidelity Investments and BlackRock Inc. are deepening their alliance in the ETF business with the introduction of actively managed accounts. The firms, two of the world’s five largest money managers, said Thursday that their relationship will expand to include offering a BlackRock model portfolio for income-seeking investors through Fidelity’s managed-accounts platform. Analysts said the move, which builds on an initiative that provides many advisers’ clients with commission-free access to iShares ETFs, could complement the efforts of both firms to expand their dominance in the growing retail market for ETFs, and even raise the competitive stakes for other managed-account providers that use ETFs. “BlackRock is keen to leverage Fidelity’s pipeline and platform to get broader access to a retail-investor audience, and I think Fidelity is keen to leverage BlackRock’s expertise in ETF manufacturing, first and foremost, and portfolio and outcome-oriented strategy production,” said Ben Johnson, an analyst with Morningstar Inc. The managed account program — available to Fidelity retail customers starting May 1 — will not be available at the moment to advisers who hold assets in custody with Fidelity, according to a Fidelity spokeswoman Erica Birke. Their platform already offers access to a range of “other products with similar investment strategies available that are used by advisers today,” Ms. Birke said. Those ETF strategists, which include a variety of large advisory firms that manage portfolios using primarily ETFs, are major institutional clients of ETF firms like BlackRock. “This is a clear foray into what we’ve defined as the ETF managed-portfolio space, so I think they’re going to increasingly be entering more direct competition with some of their biggest clients,” said Mr. Johnson The new product — the BlackRock Diversified Income Portfolio — is described as a tactical, multiasset managed strategy investing globally. Fees will start at 1.1% annually for the first $200,000 managed, decreasing to 0.55% for accounts with $3 million or more, said Fidelity spokesman Robert Beauregard. In a statement, BlackRock managing director Sue Thompson said iShares has supported the growth of ETF strategists, whose asset allocation models are “complementary to the strategic and outcome-oriented model offered by Fidelity.” It was not clear whether the service will use iShares products exclusively. As part of their arrangement, BlackRock pays Fidelity, which promotes its funds and makes them available without the typical transaction commissions to millions of retail investors as well as about 3,300 firms on its adviser custody platform, representing 1.1 million clients at the end of last year. Fidelity is a major presence in the U.S. mutual fund industry but, until its relationship with BlackRock, the fund house largely missed the thundering growth of the ETF industry. The firm managed just one exchange-traded fund as the industry grew twelvefold from $130 billion in late 2003 to $1.6 trillion in 2013, when it launched 10 sector funds, subadvised by BlackRock. BlackRock acquired the iShares business as part of a 2009 transaction for Barclays Global Investors. Commission-free trading, which is now offered on some products at Fidelity, TD Ameritrade and the Charles Schwab Corp. platform, has been welcomed warmly by advisers. In a joint statement, BlackRock and Fidelity said investors and advisers put 86% more in the 65 iShares ETFs that are available without commission than in the year before and said that in their first five months, the Fidelity sector ETFs have gathered some $500 million in assets.

Latest News

MetLife poll finds high-value home sales are becoming tax-planning events
MetLife poll finds high-value home sales are becoming tax-planning events

A new MetLife survey finds real estate professionals are increasingly steering clients toward tax experts as rising property values leave more sellers facing significant capital gains.

Kestra adds Raymond James recruiter to expand advisor hiring push
Kestra adds Raymond James recruiter to expand advisor hiring push

The independent broker-dealer expands its business development bench with a new recruiter and an internal promotion in the West.

Cerity Partners names Will Peng chief innovation officer
Cerity Partners names Will Peng chief innovation officer

The leading ultra-high-net-worth RIA joins other large wealth firms, including Raymond James and LPL, in creating executive roles focused on artificial intelligence strategy

BlackRock expands Aladdin's private markets benchmarking tools
BlackRock expands Aladdin's private markets benchmarking tools

New Preqin-powered benchmarks add transparency to private equity and credit performance across BlackRock's platforms.

Fed's Bowman pushes for lighter-touch AI oversight at smaller firms
Fed's Bowman pushes for lighter-touch AI oversight at smaller firms

Supervision vice chair speaks following recent launch of AI adoption practices by regulators.

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.