While in attendance at Inside ETFs, Greg Friedman, Head of ETF Management and Strategy at Fidelity Investments, was able to talk with ETF Trends about the state of active equity and the plan for the year of ahead.
Friedman began by stating how exciting it was to have the approval to do active equity ETFs, with the innovation that comes with it. Fidelity currently has three products in registration. At the same time, Friedman notes how Fidelity is also going to license its technology to other asset managers and leverage the platform.
In speaking about the potential impact, based on the market’s evolution, Friedman sees active equity strategies as the latest chapter of where the company has been heading. While there have been similar concepts in the past, complete with full transparency, it never really had the traction or the support to be a success.
However, with the advent of different applications approved by the SEC, and the quality and size of interested managers, there’s a clear development that could be a major game-changer.
“It’s the one piece that’s been missing from the ETF toolbox so far,” Friedman added.
An Active Future in the ETF World
According to Friedman, it’s also essential to keep in mind how much of a slow-growth this will be. That tends to be the way things work in the ETF world, due to a level of commitment to the long run of things and doing what is right for investors. Still, there will be a lot of product in the next couple of years.
“It’s going to be the product that the SEC is comfortable with,” explains Friedman. “At Fidelity, we’re really committed to creating a platform where we can educate our clients, and educate the industry. It’s going to be direct investors and advisors out of the gate, and they’re going to need the extra hand-holding as to why this is different. It’s still an ETF; it acts like an ETF; I don’t think there are any huge risk-related differences.”
As an industry, this is the biggest change seen in a long time. Friedman believes the product impact is going to be significant, but the opportunities will be more so.
“I think we’ll be able to provide, for the first time, active excess return strategies for our clients,” Friedman states.”It’s what they’ve been looking for and missing, so I think this is a significant development in the ETF industry.”
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