Fidelity Investments Is Looking To Play Catch-Up And Join The ETF Industry With The Launch Of “Fidelity Select Funds”

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January 27, 2010 12:59pm ETF BASIC NEWS

fidelity“Mutual fund giant Fidelity Investments has given early indications that it could enter the $1 trillion dollar ETF industry with its own set of proprietary funds. Following in the footsteps of asset

 managers like Schwab (SCHW), PIMCO, State Street (STT) and Blackrock (BLK), Fidelity’s new funds could help to expand its audience and create a “stickier” customer base. The recent announcement coincided with the retirement of Rodger Lawson, Fidelity’s second-highest ranking executive. Lawson, who will be leaving the firm at the end of March, recently noted that the firm may consider opening actively managed ETFs modeled after its sector mutual funds, known as the Fidelity Select funds,” Don Dion Reports From The Street.

Dion continues to say, “While the timing of Lawson’s announcement may be surprising, the ETF industry is becoming an increasingly popular destination for large asset managers. In an article earlier this month, I suggested that Fidelity was “late to the ETF game.” However, as investors shift assets from traditional mutual funds into lower-cost ETF models, Fidelity’s hesitancy is costing the firm. Since 2007, iShares, recently acquired by Blackrock, has gained more than $126 billion in assets. Fidelity, according to the Wall Street Journal, lost more than $15 billion in assets during that period.”

“The latest trend in ETF development, an area where Fidelity hopes to make its mark, is “actively managed” funds. Fidelity’s plan to launch proprietary ETFs is a logical addition to existing ETF tools as well as a logical extension of existing Fidelity Select Funds, which track individual market sectors. Fidelity currently offers ETF research on its website. As ETFs become a more fundamental part of 401k planning, Fidelity’s dominance among this group of investors could come under pressure if the firm doesn’t develop the new funds expediently. 2010 could prove to be an interesting year for Fidelity, as both financial firms and investors grapple with the changed economic landscape. While the process of developing and launching successful ETFs is a challenge for any firm, it will be an obstacle that Fidelity has to overcome to stay relevant,” Dion Reports.

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