Fidelity to Debut First Group of Active Bond ETFsSabrina Willmer
Fidelity Investments, the money manager that operates the largest online brokerage, is listing its first actively managed bond exchange-traded funds as part of a push to expand its line-up.
Fidelity Total Bond ETF, Fidelity Limited Term Bond ETF and Fidelity Corporate Bond ETF will start trading on the New York Stock Exchange at 9:30 a.m. Active ETFs combine the security selection of an actively managed fund with the intraday trading and some of the cost-saving characteristics of traditional ETFs.
Fidelity, known for its actively managed stock mutual funds, has been a latecomer to ETFs, the fastest-growing area of the asset-management industry over the past decade. The firm late last year started offering 10 passive industry-focused ETFs, which have amassed more than $1.4 billion in assets. It also entered into a partnership with BlackRock Inc., where it sells the firm’s iShares ETFs without trading commissions.
“It is not about growing assets, but that there is demand for this product,” Bob Brown, president of Boston-based Fidelity’s bond division, said in an interview.
Bond ETFs, which account for 76 percent of active ETF assets, have grown at an average annual rate of 158 percent since January 2010. Brown said the firm will continue to open active bond ETFs on the taxable and municipal side. Fidelity is waiting for regulatory approval on an actively-managed mortgage-focused ETF and plans to list an investment-grade bond strategy, said Brown.
Fidelity is entering a market that Pacific Investment Management Co. has dominated. Pimco, which recently lost its co-founder Bill Gross to Janus Capital Group Inc., offered eight active ETFs with $7.9 billion, or about 61 percent of the market as of May, according to data compiled by Bloomberg. Investors pulled $446.5 million from PIMCO’s Total Return ETF on Sept. 26, the day Gross announced his decision to quit.
The Fidelity funds will be managed by the same bond teams that manage the mutual fund offerings dedicated to the strategies, said Brown. There are regulatory and structural differences between the mutual fund and ETF offerings so the performance won’t be identical, according to Brown. The expense ratio on the ETFs is 0.45 percent.
Fidelity, founded by Edward C. Johnson Jr. in 1946, was best known for decades as home to top stock pickers such as Gerald Tsai and Peter Lynch. The firm managed $1.97 trillion in assets as of July 31.