News

Fidelity to Join Mutual Fund-to-ETF Club With $430 Million Flip

S&P Futures

4,034.00

+1.00(+0.02%)

 

Dow Futures

34,223.00

+12.00(+0.04%)

 

Nasdaq Futures

11,853.50

-9.25(-0.08%)

 

Russell 2000 Futures

1,869.00

+2.60(+0.14%)

 

Crude Oil

79.48

+1.54(+1.98%)

 

Gold

1,750.60

+5.00(+0.29%)

 

Silver

21.30

-0.07(-0.31%)

 

EUR/USD

1.0399

-0.0013(-0.12%)

 

10-Yr Bond

3.7060

0.0000(0.00%)

 

Vix

20.73

-0.56(-2.63%)

 

GBP/USD

1.2082

-0.0032(-0.26%)

 

USD/JPY

139.4280

+0.8380(+0.60%)

 

BTC-USD

16,442.20

-152.96(-0.92%)

 

CMC Crypto 200

383.31

+0.73(+0.19%)

 

FTSE 100

7,486.75

+20.15(+0.27%)

 

Nikkei 225

28,283.03

-100.06(-0.35%)

 

(Bloomberg) — Fidelity Investments, one of the country’s largest asset managers, is making its first foray into converting some of its mutual funds into ETFs.

Most Read from Bloomberg

Elizabeth Holmes Judge Proposes Texas Prison, Family Visits

Anwar to Test Majority With Malaysia Parliament Vote in December

China Covid Cases Jump to Record High, Topping Shanghai Outbreak

Most Fed Officials Seek to Slow Pace of Interest-Rate Hikes Soon

The Boston-based firm on Wednesday revealed plans to convert six of its thematic mutual funds into actively-managed exchange-traded funds. Fidelity expects to complete the conversion in June 2023.

The conversion would bring its active equity ETF lineup to 15 funds from an existing nine. The current funds had about $720 million in assets under management as of Oct. 31, while the assets of the six thematic mutual funds total roughly $430 million, according to emailed comments from a Fidelity spokesperson.

In the coming decade, more than $1 trillion worth of mutual fund assets could be converted into ETFs, according to an analysis by Bloomberg Intelligence. That would represent a huge boost to the $6.5 trillion US ETF market.

The new ETFs will each have an expense ratio of 0.50%, which is roughly the industry average. Ahead of the conversion, the mutual funds’ expense ratio will be slashed to 0.50% from 1% on or about April 1, 2023.

“Fido has little to lose with this conversion,” Bloomberg Intelligence’s Henry Jim said, referring to Fidelity. “They are giving up half the fees on a relatively small asset base and in return they are getting a suite of thematic ETFs that are cheaper to run and easier to sell to a broader client base,”

The trend of mutual fund conversion gained traction last year after Dimensional Fund Advisors completed one of the first formal attempts in June 2021. In June, JPMorgan completed a conversion of four mutual funds including the $1.3 billion JPMorgan Inflation Managed Bond Fund. In October, Neuberger Berman converted its only US commodity mutual fund into an ETF.

Read more: Neuberger Berman Jump-Starts ETF Assets With $196 Million Switch

Tax efficiency is frequently cited as a reason to make the switch. “A growing number of investors are seeking the tax efficiency, trading flexibility and potential cost efficiency benefits of ETF vehicles,” Greg Friedman, Fidelity’s head of ETF management and strategy, said in a statement.

All converted ETFs will be led by the the same portfolio managers as the mutual funds, the firm said in statement. Fidelity manages a total of 51 ETFs with a collective $28 billion in assets.

Most Read from Bloomberg Businessweek

Elon Musk Keeps Quoting Elon Musk About His Genius

Tech Layoffs Send H-1B Visa Holders Scrambling for New Jobs

Crypto’s Crash Is Helping a Few Couples Rekindle Their Relationships

US Is Focused on Regulating Private Equity Like Never Before

The Robot Tractors Are Coming, Just as Soon as We Crush a Few Bugs

©2022 Bloomberg L.P.

Advertisement

Leave a Reply

Your email address will not be published. Required fields are marked *