Some Well-Timed ETF Launches

Aided by declining Treasury yields and the status of U.S. government debt as the world’s top-performing fixed income asset class, bond exchange traded funds have been prolific asset gatherers this year, hauling in nearly a quarter of all new assets that have flowed into ETFs.

Robust demand for some bond ETFs could be interpreted as a sign that the current environment is conducive to launching new bond ETFs, which mutual fund giant Fidelity did Thursday with the debut of three actively managed fixed income funds.

Fidelity, long associated with equities, has $865 billion in fixed income assets under management, indicating the combination of its heft and superior brand recognition can expedite Fidelity’s rise to credible player in the fixed income ETF space. [Fidelity’s Epic Active ETF Launch]

It would appear that three new ETFs from Fidelity, in particular the Fidelity Total Bond ETF (NYSEArca: FBND), have the advantage of good timing, particularly with assets departing the PIMCO Total Return ETF (NYSEArca: BOND) and PIMCO mutual funds in the wake of Bill Gross’ recent departure.

Fidelity’s “ETFs come to market as many are considering whether to stay with PIMCO in light of the late September departure of its prominent manager Bill Gross. Indeed, according to data, the now $2.9 billion BOND has experienced $800 million in outflows in the nearly two weeks since Gross’s exit. Besides having more stable fund management, these Fidelity ETFs will also have expense ratio 10 basis points less than BOND’s 0.55%,” said S&P Capital IQ in a new research note.

Like BOND, FBND is ETF equivalent of a popular mutual fund. So are Fidelity’s other new bond ETFs, the Fidelity Limited Term Bond ETF (NYSEArca: FLTB) and Fidelity Corporate Bond ETF (NYSEArca: FCOR).