Investment giant Fidelity is considering adding to its lineup of exchange traded funds by entering the fast-growing smart beta arena, but the firm has not confirmed whether or not it will offer such funds.
Fidelity “filed with the Securities and Exchange Commission on Friday for permission to add a little extra special sauce when creating self-indexing funds — that is, funds that track indexes produced by Fidelity, rather than an outside party, such as Standard & Poor’s,” reports John Waggoner for InvestmentNews.
Fidelity already offers an expansive lineup of traditional sector ETFs, including the Fidelity MSCI Real Estate Index ETF (NYSEArca: FREL), Fidelity MSCI Materials Index ETF (NYSEArca: FMAT) and the Fidelity MSCI Telecommunication Services Index ETF (NYSEArca: FCOM).
[related_stories]In October 2014, firm introduced three actively managed bond funds – the Fidelity Total Bond ETF (NYSEArca: FBND), Fidelity Limited Term Bond ETF (NYSEArca: FLTB) and the Fidelity Corporate Bond ETF (NYSEArca: FCOR).
There is a growth spurt in the ETF space as more smart-beta 2.0 index-based funds come out. These ETFs track multi-factor indexing methodologies that rely on multiple empirically rewarded factors and multi-weighting strategies to potentially diminish risk and enhance returns.
Fidelity rivals such as Charles Schwab and John Hancock have already expanded into the smart beta universe with success.
Strategic beta – or smart beta – receives a lot of attention as one category of factor-based investing. Within the category, there are a number of different types, such as single-factor equal-weight or low-volatility, and perhaps the more common multi-factored, fundamentally-weighted indexes.
“Self-indexing is at the heart of so-called smart beta ETFs, which typically follow a set of rules for security selection, such as buying stocks based on dividend payout or earnings momentum. While archrival Vanguard has little taste for smart beta, preferring indexes based on market capitalization, other firms, such as Wisdom Tree and PowerShares, have rolled out dozens of smart-beta funds,” according to InvestmentNews.