Ron Rowland: Fidelity Investments enlarged its ETF footprint today (10/24/2013) by introducing 10 sector ETFs. Unlike most of Fidelity’s actively managed mutual fund products, these new ETFs are designed to passively track MSCI USA IMI sector indexes. The IMI designation stands for Investable Market Index, which means each fund attempts to cover 99% of the investable U.S. sector market by including small and mid cap stocks. The new ETFs use market capitalization weighting to target each of the 10 major sectors identified by the Global Industry Classification Standard (“GICS”).
According to the press release, Fidelity now offers the lowest priced sector ETF family with net expense ratios of just 0.12%. Fidelity hired BlackRock (BLK), the management firm behind the iShares brand, to sub-advise this new ETF lineup. Additional information is contained in the Fidelity Sector ETF FAQs and in the individual ETF links below:
- Fidelity MSCI Consumer Discretionary Index ETF (FDIS) (FDIS snapshot)
- Fidelity MSCI Consumer Staples Index ETF (FSTA) (FSTA snapshot)
- Fidelity MSCI Energy Index ETF (FENY) (FENY snapshot)
- Fidelity MSCI Financials Index ETF (FNCL) (FNCL snapshot)
- Fidelity MSCI Health Care Index ETF (FHLC) (FHLC snapshot)
- Fidelity MSCI Industrials Index ETF (FIDU) (FIDU snapshot)
- Fidelity MSCI Information Technology Index ETF (FTEC) (FTEC snapshot)
- Fidelity MSCI Materials Index ETF (FMAT) (FMAT snapshot)
- Fidelity MSCI Telecommunication Services Index ETF (FCOM) (FCOM snapshot)
- Fidelity MSCI Utilities Index ETF (FUTY) (FUTY snapshot)
These new sector ETFs are eligible for commission-free trading at Fidelity Brokerage when using online channels. After February 1, 2014, they will be subject to a short-term trading fee if held less than 30 days. For further information on these fees, please consult the Fidelity Brokerage Commission and Fee Schedule (pdf).
Analysis/Opinion: A week ago, Fidelity had just one ETF – the Fidelity Nasdaq Composite Tracking Stock (ONEQ) which was launched 10 years ago. Fidelity was the first firm to offer a suite of sector funds, with its Select Family of sector mutual funds introduced in 1981. However, when it came to sector ETFs, Fidelity has been conspicuous by its absence. Fidelity has now made a move, but the question of whether this is too little and too late remains unanswered.
Fidelity’s claim of having the lowest cost sector lineup is true for now. The 0.12% expense ratio edges out the 0.18% fee for the Select Sector SPDRs and the 0.14% for most Vanguard sector ETFs. Expense ratio differences should be a non-issue for users of these funds. Additionally, the bid/ask spreads were held to one cent every time we checked today.