Fidelity Investments on Nov. 13 announced the upcoming launch of six active equity ETFs — each a mutual fund-to-ETF conversion — and the slashing of total expense ratios on its 13 equity factor ETFs.
The new ETFs will be available Nov. 20 commission-free for individual investors and financial advisers through Fidelity's online brokerage platforms, the release said.
In June, Fidelity had announced its plan to convert its actively managed enhanced index mutual fund suite, first launched in 2007, into ETFs. Each new transparent ETF will keep the same investment objective and be managed in the same way as its former mutual fund counterpart, Fidelity said in a news release.
The enhanced ETFs will have expense ratios ranging from 0.18% to 0.28%, the news release said. The new funds are the Fidelity Enhanced Large Cap Core ETF, Fidelity Enhanced Large Cap Growth ETF, Fidelity Enhanced Large Cap Value ETF, Fidelity Enhanced Mid Cap ETF, Fidelity Enhanced Small Cap ETF and Fidelity Enhanced International ETF.
The new funds will be "among the cheaper active options available on the market," according to Bryan Armour, director of passive strategies research for North America at Morningstar Research Services, a Morningstar subsidiary.
"Aggressively priced active ETFs follows the trend of the cheapest active ETFs winning investors' money," Armour said in an email, adding that investors have consistently shown more interest in "cheap ETFs" than expensive ones irrespective of whether they are actively or passively managed.
"Dimensional quickly went from zero ETFs to the largest provider of active ETFs in three years because, in part, of their affordability," he said. "By aggressively pricing their ETFs, Fidelity joins an elite club of low-cost active ETF issuers."
Dimensional Fund Advisors announced the listing of its first two ETFs on Nov. 18, 2020. Just shy of the three-year anniversary of that event, the firm's ETF assets under management have risen to about $100 billion, a Dimensional spokesperson said.
In addition, Fidelity reduced pricing for all of its equity factor ETFs, according to its release, which said the reductions took effect earlier this month. The total expense ratio decreased to 0.15% from 0.29% for nine domestic factor ETFs, to 0.18% from 0.39% for three international factor ETFs and to 0.25% from 0.45% for one emerging markets factor ETF.
"These are big price cuts that immediately benefit investors," Armour said, adding factor investing follows a strategy of targeting characteristics such as value, momentum and quality. "These factor ETFs should fall among some of the cheaper offerings within their targeted factor exposures."
The six new ETFs will bring Fidelity's ETF lineup to 64 funds. As of Oct. 31, Fidelity's ETF lineup totaled $36 billion in assets under management, a Fidelity spokesperson said. As of Sept. 30, Fidelity had $11.5 trillion in assets under administration, including discretionary assets of $4.4 trillion, the release said.
