As exchange traded funds (ETFs) continue to gleam with popularity and enable investors exposure to specific sectors, Fidelity argues that its mutual funds do the same. 

Fidelity offers nine mutual funds that correspond to the well-known Select Sector SPDRs family of ETFs. The provider hopes that some of the popularity of sector ETFs will heighten the appeal of its sector-based mutual funds, too.

Morningstar says seven of Fidelity’s sector-based funds have outperformed their counterpart ETFs over the past 10 years. State Street says that the long-term comparison is not relevant because Fidelity switched its benchmarks in 2006. The provider also stated that, over the long haul, lower expense ratios in ETFs will give them an edge over the Fidelity funds, reports Ian Salisbury of The Wall Street Journal.

Fidelity could be facing an uphill battle in marketing the actively managed sector funds because of the broader range of investors that ETFs reach, from retail investors all the way up to institutions.

ETFs hold appeal over mutual funds because their indexing strategy is superior to the strategy of active management. Studies have shown that most actively managed mutual funds underperform their benchmarks. (Why mutual funds want in on ETFs).

The Fidelity funds still don’t offer some of the characteristics inherent in ETFs, namely the ability to be traded intraday, transparency and “in-kind” redemptions. (More reasons ETFs are better than Mutual Funds).

Fidelity does offer one ETF: Fidelity NASDAQ Composite Index Tracking (ONEQ), but the provider has said it has no plans to expand into ETFs beyond that. And why should they? Two-thirds of its revenue comes from 401(k)s. Now that money is coming back into those retirement plans, Fidelity doesn’t want to cannibalize their business model. (Why Fidelity won’t play the ETF game).

For more stories on ETFs, visit our education category.

Kevin Grewal contributed to this article.

Tags: ETF 101, Mutual Funds