At a time when exchange traded funds are gaining assets at the
mutual fund industry's expense, two of the largest players are
taking their game to a new level. Fidelity Investments -- the
country's largest retirement plan provider -- and BlackRock --
the top ETF provider -- are more than doubling the number of
Fidelity brokerage clients can trade free.
As part of the expanded partnership, BlackRock will help
Fidelity create passively managed sector ETFs. And Fidelity is
creating new ETF portfolios using iShares ETFs for separately
managed accounts in its advisory services business.
"This is clearly a giant step but still just a step toward
becoming a true captain of the (
) industry. Given that Fidelity missed the first boat, they had
to build their own to compete," said Jim Lowell, chief investment
officer at Adviser Investments in Newton Centre, Mass., and
editor of Fidelity Investor. "Fidelity's lineup enables them to
return the broadsides launched by both Schwab and Vanguard and
others while safeguarding their brand."
Boston-based Fidelity increased its menu of commission-free
trading from 30 iShares ETFs to 65. It falls short of rival
brokerages. TD Ameritrade has more than 100 available. Charles
Schwab has a lineup of 105 commission-free ETFs from six major
providers available on its OneSource platform. It trumps
Vanguard, which offers free trading on all of its 46
Fidelity's fine print includes a $7.95 trading fee if traders
sell within 30 days of buying. But this short-term trading fee is
being waived until July 31.
The deal benefits New-York BlackRock by potentially drawing
investors to its thinly traded ETFs. Free trading is not
available for iShares' most popular ETFs:iShares Russell 2000
),iShares MSCI Emerging Markets Index (
),iShares MSCI EAFE Index Fund (
), nearly all single-country and most sector ETFs.
As the world's largest ETF family, iShares ETFs have about
$759 billion under management globally, making up about 38% the
$2 trillion ETF market, according to BlackRock.
Fidelity has about $1.7 trillion in assets under management
with a very popular assortment of "Select" sector funds, but it
sat out the early ETF buildup. It offers only one ETF,Fidelity
Nasdaq Composite Index (
), which tracks more than 3,000 stocks traded on the tech-heavy
exchange with nearly $200 million in assets.
"Fidelity's decision looks like it will be able to compete
more broadly against not just its ETF competitors but against its
fund competitors like Vanguard," Lowell wrote. "But getting its
own products and brand built into the ETFs, while key to
Fidelity's ETF business success, will take time."