The commission-free exchange traded funds movement continues to gain steam. In late October, it was reported that Raymond James, the Florida-based brokerage firm, will offer commission-free ETFs to its registered investment advisors (RIAs) and their clients.
It is expected that Raymond James’ initial foray into commission-free ETFs will feature a combined 120 funds from First Trust, AdvisorShares, ALPS Advisors and Greenhaven. First Trust is the sixth-largest U.S. issuer of ETFs while Maryland-based AdvisorShares is one of the largest issuers of actively managed ETFs. [Raymond James Considers Commission-Free ETFs]
And on Thursday it was reported that Pershing LLC, the clearing firm, prime broker and provider of solutions to registered investment advisors that is a unit of Bank of New York Mellon (NYSE: BK), could be the next big name to provide clients with access to select exchange traded funds on a commission-free basis.
However, Charles Schwab (NYSE: SCHW), Fidelity and TD Ameritrade (NasdaqGS: AMTD) have been long-standing players in the commission-free ETF game, offering those platforms to both advisors that custody assets with the firms and to their retail clients.
We recently highlighted some of the popular ETFs available on Schwab ETF OneSource, that firm’s commission-free ETF platform. Today, we examine Fidelity’s commission-free offerings with the note that all of the fund’s featured are either Fidelity or iShares ETFs because Fidelity’s commission-free platform is limited to those two providers.
iShares Core High Dividend ETF (NYSEArca: HDV)
Assets under management (AUM): $4.7 billion
Comment: Not only is HDV available commission-free to Fidelity clients, cost –conscious investors will also enjoy the fact that the ETF was a recent addition to the iShares core lineup of low-fee ETFs. That means HDV, which once charged 0.4% per year, now charges just 0.12%. A trailing 12-month yield of 3.15% is buoyed by large weights to dependable dividend sectors such as staple, telecom and utilities. [Dividend ETFs Winning With Big Utilities Weights]
Fidelity Total Bond ETF (NYSEArca: FBND)
AUM: N/A
Comment: Not only can investors grab the newly minted FBND sans commission at Fidelity, but the ETF’s 0.45% annual expense ratio is low by the standards of actively managed ETFs. FBND launched earlier this month and considering Fidelity’s brand recognition, distribution prowess and the flight to fixed income ETFs displayed by investors, it would not be surprising to see FBND be a success.
Fidelity’s other new actively managed bond ETFs, the Fidelity Limited Term Bond ETF (NYSEArca: FLTB) and the Fidelity Corporate Bond ETF (NYSEArca: FCOR), are also commission-free to the firm’s clients.
Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC)
AUM: $237.2 million
Comment: Fidelity introduced its 10 sector ETFs in October 2013 and by June 2014, the group had a combined $1 billion in assets under management. FHLC has been a big driver of Fidelity’s sector ETF growth. Not only is FHLC Fidelity’s play on the best-performing S&P 500 sector this year, it is also the least expensive with an annual fee of just 0.12%.
iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG)
AUM: $5.9 billion
Comment: IEMG is an original member of the iShares core suite and its 0.18% expense ratio makes it one of the least expensive emerging markets on the market today. However, it has taken the ETF barely more than two years of trading to amass nearly $6 billion in assets, proving the point that plenty of professional money managers like low-fee ETFs, too.
Fidelity MSCI Information Technology Index ETF (NYSEArca: FTEC)
AUM: $223.9 million
Comment: Like FHLC, FTEC has been a big driver of Fidelity’s sect ETF. And like its health care counterpart, FTEC charges 0.12% per year, making it the cheapest technology sector ETF. With a 15.7% weight to Apple (NasdaqGS: AAPL), FTEC is also worthy of its place in the “Apple ETF” conversation. [Rally Finally Brings Investors Back to Apple ETFs]
iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT)
AUM: $4.6 billion
Comment: TLT’s status as a commission-free ETF is icing on the cake for investors that have been involved with the ETF this year. With 10-year Treasury yields in a tailspin, TLT is up nearly 20% year-to-date, a performance that is nearly twice as good as the S&P 500’s and one that has been topped by just two non-leveraged bond ETFs.
iShares Select Dividend ETF (NYSEArca: DVY)
AUM: $14.8 billion
Comment: Another marquee dividend ETF served up Fidelity without commissions. DVY, the second-largest U.S. dividend ETF, is also another dividend fund that has benefited from a massive weight to the utilities sector. The ETF, with a trailing 12-month yield of 3.16%, allocates 35.1% of its weight to utilities stocks. That is more than double its next largest sector weight, 14.9% to industrials.
iShares MSCI Frontier 100 ETF (NYSEArca: FM)
AUM: $766 million
Comment: Owning frontier markets via the ETF wrapper is costlier than investing in emerging markets as evidenced by FM’s 0.79% expense ratio, but the total cost of ownership experience is tempered a bit by FM’s availability on Fidelity’s commission-free platform.
Up about 6% year-to-date, FM appears poised for another year of out-performance relative to diversified emerging markets ETFs. FM now allocates over 46% of its combined weight to Kuwait, Nigeria and Argentina as it continues reducing exposure to Qatar and the United Arab Emirates because those nations are now classified as emerging markets.
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of Apple, DVY and TLT.