Fidelity to Open Cheapest Single-Industry ETFs in Asset Push


Fidelity Investments, the second-biggest mutual-fund provider, plans to open the cheapest lineup of single-industry exchange-traded funds as it seeks to break into a market dominated by Vanguard Group Inc. and BlackRock Inc. (BLK:US)

Fidelity on Oct. 24 will start 10 funds, focused on industries ranging from energy to telecommunications, with an annual expense ratio of 0.12 percent, cheaper by 2 basis points than Vanguard Group Inc.’s lineup of similar ETFs, according to a regulatory filing and data compiled by Bloomberg. The ETFs, distributed by Fidelity, will be managed by BlackRock, the world’s biggest money manager. A basis point is one-hundredth of a percentage point.

“That tells me they want to be aggressive,” Michael Rawson, a fund analyst in Chicago-based research firm Morningstar Inc. (MORN:US), said in a telephone interview. “It’s going to be very difficult for them to build scale and liquidity in these products, but it’s a space they have to be in.”

Fidelity has been surpassed in assets by Vanguard and BlackRock in the past five years, in part because of the growth of index-based offerings such as ETFs. Fidelity, which offers only one ETF, has seen assets in its mainstay stock mutual funds decline 16 percent over the past five years, while management and advisory fees dropped an estimated 13 percent.

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