I do the “ETF of the Week” for MarketWatch every Thursday on Chuck Jaffe’s MoneyLife Show where I highlight big movers and disappointments within the exchange traded fund market.
Instead of the normal ETF picks, this week I focused on big changes in the ETF industry, as two powerhouses, Fidelity Investments and BlackRock (NYSE: BLK), announced a new partnership that could have big implications on the growing business. [Fidelity, BlackRock Team Up on ETFs: What it Means]
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Separately, Todd Rosenbluth of S&P Capital IQ was out with a note weighing in on the ramifications of the pact between Fidelity and BlackRock. Here are his thoughts:
- Partnering with iShares (40% of ETF market) is a big deal. iShares Core Total U.S. Bond Market (NYSEArca: AGG) and iShares Core S&P 500 (NYSEArca: IVV) are among the most popular actively traded ETFs in US.
- Other platforms (Schwab and TDAmeritrade) tend to have ETFs that have less assets or are from smaller providers like Schwab (NYSE: SCHW) and Guggenheim.
- The commission fee will help to gather assets as no cost to trade helps offset a higher expense ratio.
- Partnering with Fidelity on future sector ETFs is a big deal. State Street (NYSE: STT) and Vanguard have more ETF assets in sector products than iShares. Fidelity has a strong brand in sector investing through mutual funds and we think they can have success once they launch ETFs.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.