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).