For years, mutual fund giant Fidelity was a non-factor in the expansion of the exchange traded funds industry.
While rivals such as BlackRock (NYSE: BLK), Vanguard and its Boston neighbor State Street (NYSE: STT) each amassed hundreds of billions in ETF assets under management, Fidelity stuck with just one ETF: The Fidelity NASDAQ Composite Index Tracking Stock ETF.
That changed last October when Fidelity rolled out 10 sector ETFs. The success of those sector funds has helped Fidelity quickly gain $1.2 billion in new ETF assets. [Fidelity ETFs Quik to $1B in AUM]
“Fidelity’s foray into the ETF world wasn’t capricious; its index-based sector ETFs are an outgrowth of the actively managed sector funds it’s been running for more than 30 years,” reports Lewis Braham for Barron’s.
As Barron’s notes, Fidelity has been a force for years when it comes to sector mutual funds. “Fidelity’s 39 “Select” sector funds experienced $7.1 billion in inflows in the last five years,” Barron’s reported citing Morningstar data.
While Fidelity’s sector ETFs, a group including the Fidelity MSCI Energy Index ETF (NYSEArca: FENY) and the Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC), entered an arena dominated by State Street and Vanguard, Fidelity ensured it would have some competitive advantages.
For example, Fidelity’s 10 sector ETFs undercut Vanguard on price (0.12% per year compared to 0.14% on most Vanguard sector funds) and are available to Fidelity clients on a commission-free basis. [Fidelity Pushes Vanguard on Sector ETFs]