The still young universe of active non-transparent ETFs (ANTs) is poised to get a new, big-name constituent. Fidelity Investments filed plans with the Securities and Exchange Commission (SEC) for an ANT version of its famed Fidelity Magellan Fund, an actively managed mutual fund with $21.7 billion in assets under management.
One of the most venerable and largest actively managed mutual funds in the U.S., Fidelity Magellan debuted in 1963 and invests in both growth and value stocks. The mutual fund version charges 0.77% per year, or $77 on a $10,000 investment, but it remains to be seen what the fee will be on the ANT version.
One way of looking at ANTs is that this category is new fund “technology.” ANTs represent the best of both worlds’ ideas: the advantages of active management with the liquidity and tradability of ETFs, something that long eluded the actively managed mutual fund industry.
With more traditional mutual funds eyeing the ETF space but remaining reluctant to give up their secret sauce under the transparency of the ETF investment vehicle, many are looking into non-transparent exchange traded products as a way to combine the best of two worlds.
Fidelity Already an ANT Player
Boston-based Fidelity is already a growing player in the ANTs universe. In June, the issuer launched three ANTs.
Those funds are the Fidelity Blue Chip Growth ETF (FBCG), Fidelity Blue Chip Value ETF (FBCV) and the Fidelity New Millennium ETF (FMIL).
The Fidelity approach uses a proxy basket methodology, allowing for seamless implementation that uses existing infrastructure and requires very little operational build-out, adding the methodology helps to protect the firm’s insights and research while providing sufficient information to efficiently affect a trade.
Fidelity’s active equity ETFs will employ an innovative tracking basket methodology, which maintains the benefits of the ETF structure, provides information to market participants to promote efficient trading of shares, and preserves the ability to add value through active management.
Currently, the Fidelity Magellan mutual allocates almost 36% of its weight to technology stocks and a combined 24% of its weight to the communication services and healthcare sectors.
A date for the launch of the ANT version hasn’t been revealed.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
