The largest mutual fund companies are feeling the competitive pinch from the rise of low-cost exchange traded funds, putting more pressure on the firms to jump on the ETF bandwagon.

For example, Fidelity Investments recently reported “massive outflows” from its stock mutual funds in 2011 although operating profit improved due to expense management, according to Reuters.

“Fidelity, known for its active investment management philosophy, is losing market share to passive strategies. Exchange traded funds … are the most glaring hole in Fidelity’s product line-up for investors,” Reuters reported.

In its annual report, Fidelity said “index and exchange traded funds continued to capture market share from actively managed funds, while extremely low interest rates led to outflows from money market funds,” according to the article.

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