Look out BlackRock and Vanguard, Fidelity files with SEC for six smart beta ETFs

Fidelity Investments has filed prospectuses with the Securities and Exchange Commission for six new smart beta ETFs. The funds: Fidelity Core Dividend ETF, Fidelity Dividend for Rising Rates, Fidelity Low Volalitily Factor ETF, Fidelity Momentum Factor ETF, Fidelity Quality Factor ETF and Fidelity Value Factor ETF. The funds will be self-indexing using proprietary methodology. “This will allow them to tap into their security selection expertise with the addition of screening attributes like earnings volatility — for low vol — or low price to future earnings — for value,” said Todd Rosenbluth, director of ETF & Mutual Fund Research with S&P Global Market Intelligence. “These attributes are unique compared to ETFs offered by iShares, PowerShares and others.” For example, according to the filing, the Fidelity Dividend Index for Rising Rates is designed to reflect the performance of stocks of large and mid-cap dividend-paying companies that are expected to continue to pay and grow their dividends and have a positive correlation of returns to increasing 10-year U.S. Treasury yields. “These look to be smarter than your average smart beta product,” said Jim Lowell, editor of Fidelity Investor, a newsletter. “I like what I see.” Boston-based Fidelity has been slow to enter the ETF market and, Mr. Lowell noted, it is leaving commodity index products to other producers. “Someone else invented the wheel,” Mr. Lowell said. “But Fidelity is getting out ahead of Vanguard with these interesting tactical spokes.” While Fidelity has agreements to sell other ETFs on its discount brokerage platform, these new products are clearly in competition with BlackRock and Vanguard. “It wants to be a major player in products that can make it money," said Mr. Lowell. No expenses were listed in the filing, however. “It will be interesting to see if Fidelity follows what it did with sector products and launches ETFs with an expense ratio in line with the cheapest comparative products from Vanguard,” Mr. Rosenbluth said.