Fidelity Wants to Sell You a New Kind of ETF
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Fidelity Investments is seeking U.S. approval to offer a new type of actively managed exchange-traded fund, a regulatory filing on Thursday showed, as the fund company seeks to regain market share lost to low-cost index funds.
Many ETFs are set up to track market indexes without the need for constant supervision by an fund manager.
Fidelity had dominated the U.S. mutual fund industry until the dot-com bubble burst in the early 2000s. It has been forced to adapt to growing competition from index funds by putting more emphasis on its brokerage business and products other than U.S. stock mutual funds.
The Boston-based company asked the U.S. Securities and Exchange Commission to let it offer an Exchange-Traded Active Fund, or ETAF, which would trade and price throughout the day and offer more tax benefits than mutual funds.
The fund managers would not have to disclose for 30 days what they buy or sell, Fidelity proposed in the filing. Actively managed ETFs are required to make such disclosures daily.
Industry analysts have said that delayed disclosure would encourage active fund managers to offer more "non-transparent" ETFs that would give them a competitive advantage.
Read More: Fidelity Takes on Vanguard in the Fund Fee Wars, and Investors Win
Boston-based Eaton Vance Corp in February launched NextShares, an exchange-traded product with delayed disclosures, as an alternative to mutual funds, but the product's backers are still working to win over converts.
In a statement, Fidelity cautioned that it might take some time to win approval for such funds. Some proposals for active ETFs and other similar products have languished without signs of progress for years.
Fidelity's filing underscores the growing urgency with which established investment managers are adapting to the fast-growing ETF industry, which has been gaining share from mutual funds, Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence, said in an email.
Index-tracking U.S. stock funds took in $1.2 trillion from 2007 to 2015, while actively managed U.S. stock funds recorded $835 billion in withdrawals during that period, according to the Investment Company Institute, a fund trade group.
Last year, the 25% of equity funds which charged the least in fees managed nearly 75% of the industry's assets, the group's data shows.
Fidelity's new funds would be structured in some ways like a closed-end fund. They would be traded like stocks, at prices close to their net asset value, the company said.
