In the past few years, passively managed mutual funds and ETFs have taken share from actively managed products.
However, through sector funds, Fidelity Research & Management has experienced growth with both types of funds.
In April 2016, S&P Global Market Intelligence sat down with Tony Rochte, President of Fidelity SelectCo, which offers sector mutual funds and ETFs that have more than $80 billion in assets. In this wide-ranging interview, S&P Global discussed why Fidelity launched sector ETFs and how they are positioned alongside sector mutual funds.
In addition, Rochte highlighted where the assets have been going and noted the addition of a Real Estate offering ahead of the pending GICS sector changes in 2016.
Fidelity sector-focused mutual funds include Fidelity Select Biotechnology Portfolio (FBIOX) and Fidelity Select Energy Portfolio (FSENX). The newer ETFs, which trade commission free on Fidelity’s brokerage platform, include Fidelity MSCI Health Care Index ETF (FHLC) and Fidelity MSCI Energy Index ETF (FENY).
Q: Fidelity has decades-long experience with sector investing through mutual funds. Why in 2013 did the firm launch sector ETFs?
Rochte: If you go back a year to 2012, we created a division inside Fidelity Asset Management called SelectCo. The division was focused on sector based investing in various formats. At the time we had 44 actively managed mutual funds with approximately $43 billion in assets. We pioneered sector mutual fund investing more than 30 years ago. For individual investors and financial advisors it was clear to us that there was continued appetite for sector products, but also a desire to express a view in a more tactical fashion. For that reason we launched a suite of initially 10 GICS based sector ETFs. There are now 11 with the addition of Real Estate and these complement the active mutual funds.
Q: Is there a preference for passive over active or vice versa?
A: We’re indifferent as long as we can provide a great investor experience. There are customers that want active management and we have seen continued growth for our sector mutual funds. And there are others that want an ETF product.