Fidelity Partners With BlackRock To Offer ETFs
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 iShares ETFs 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 ( ETF ) 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 ultra-low-fee ETFs.
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 Index ( IWM ),iShares MSCI Emerging Markets Index ( EEM ),iShares MSCI EAFE Index Fund ( EFA ), 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 ( ONEQ ), 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."