Fidelity Investments Pushing Forward on Active ETFs, Launches 2

Fidelity Investments is deepening its focus on the active ETF landscape as part of its core, Fundamental ETF equity suite. The new equity strategy, the Fidelity Fundamental Large Cap Value ETF (FFLV), launched Monday, charging a 38 basis point fee, alongside a fixed income ETF, the Fidelity Low Duration Bond ETF (FLDB), competitively priced with an expense ratio of 0.20%. The pair of active ETFs arrive as the firm looks to add additional core asset allocation building blocks to its active ETF lineup.

Fidelity’s Active ETFs in the Fundamental ETF Equity Suite

FFLV joins three ETFs receiving updates as part of a recent press release from Fidelity Investments. Those existing ETFs include the Fidelity Fundamental Large Cap Growth ETF (FFLG), the Fidelity Fundamental Large Cap Core ETF (FFLC), and the Fidelity Fundamental Small-Mid Cap ETF (FFSM). FFLG and FFLC both charge 38 basis points, while FFSM is available at 43 basis points. Together, it speaks to a growing interest in active ETFs at Fidelity Investments.

As part of those strategies joining the fundamental suite, the strategies have undergone expense reductions, management changes, and other adjustments to speak to the fundamental suite’s approach.

VettaFi caught up with Fidelity’s Head of ETF Management and Strategy, Greg Friedman, at the recent ETF Exchange conference to discuss the suite’s focus.

“We are committed to being a leader in active ETFs,” Friedman said. “Where we think we can add the greatest value to our clients and differentiate ourselves is on the smart beta and active side.”

“If you think about core (and) satellite strategy, we've got a lot of the satellites: factors, sectors, thematics, and Crypto. Where we're spending a lot of time now is on core,” he added. “How do we solve the client's core investment needs?”

See more: Fidelity Launches Six Active Equity ETF Conversions

The moves come as the firm’s new spot, Bitcoin ETP, recently celebrated its one-month anniversary. FBTC, the Fidelity Wise Origin Bitcoin Fund, had $3.8 billion in ETP AUM per VettaFi data as of February 15th. Asked about what role he sees a spot Bitcoin ETP playing in advisor portfolios, Friedman noted its separate status as an asset.

“It’s an emerging asset class, people get excited about it,” Friedman said. “We’re focused on what our clients are looking for. So, this is a space they had interest. It can serve as another important tool in someone’s toolbox for their investment needs.”

Friedman’s main focus speaking at the conference, however, stuck to its new active smart beta suite.

“It’s really exciting. You take the top convictions of a handful of Fidelity veteran portfolio managers, and then use a quant overlay to really rank the convictions. It’s really cool,” he said. “The exciting part is building out that core that we haven’t had before.”

For more news, information, and strategy, visit the ETF Investing Channel.


Disclosures Information

FBTC is not an investment company registered under the Investment Company Act of 1940 (the "1940 Act") and is not subject to regulation under the Commodity Exchange Act of 1936 (the "CEA"). As a result, shareholders of FBTC do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act or the protections afforded by the CEA.

Digital assets are highly volatile, and their market movements are very difficult to predict. Various market forces may impact their value, including, but not limited to, supply and demand, investors’ faith and their willingness to purchase it using traditional currencies, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates, an evolving legislative and regulatory environment in the U.S. and abroad, and other economic trends. Investors also face other risks, including significant and negative price swings, flash crashes, and fraud and cybersecurity risks. Digital assets may also be more susceptible to market manipulation than securities.

The performance of FBTC will not reflect the specific return an investor would realize if the investor actually purchased bitcoin. Investors in FBTC will not have any rights that bitcoin holders have. They will not have the right to receive any redemption proceeds in bitcoin.

The Fidelity® Wise Origin® Bitcoin Fund material must be preceded or accompanied by a prospectus. Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses.

Additional Information

The Fidelity Fundamental Small-Mid Cap ETF (FFSM) Semi-Transparent Active Equity ETF is different from traditional ETFs. Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment. For example: You may have to pay more money to trade the ETF’s shares. These ETFs will provide less information to traders, who tend to charge more for trades when they have less information. The price you pay to buy ETF shares on an exchange may not match the value of the ETF’s portfolio. The same is true when you sell shares. These price differences may be greater for these ETFs compared to other ETFs because they provide less information to traders.

These additional risks may be even greater in bad or uncertain market conditions. The ETFs will publish on their website each day a “Tracking Basket” designed to help trading in shares of the ETFs. While the Tracking Basket includes some of the ETF’s holdings, it is not the ETF’s actual portfolio. The differences between these ETFs and other ETFs may also have advantages. By keeping certain information about the ETFs secret, these ETFs may face less risk that other traders can predict or copy their investment strategy. This may improve the ETF’s performance. If other traders are able to copy or predict the ETF’s investment strategy, however, this may hurt the ETF’s performance. For additional information regarding the unique attributes and risks of these ETFs, see section below.

Additional information for Semi-Transparent Active Equity ETFs:

The objective of the actively managed ETF Tracking Basket is to construct a portfolio of stocks and representative index ETFs that tracks the daily performance of an actively managed ETF without exposing current holdings, trading activities, or internal equity research. The Tracking Basket is designed to conceal any nonpublic information about the underlying portfolio. It only uses the fund’s latest publicly disclosed holdings, representative ETFs, and the publicly known daily performance in its construction. You can gain access to the Tracking Basket and the Tracking Basket Weight overlap for Fidelity ETFs on Fidelity.com or i.fidelity.com. See the competitor’s website for additional details on non-Fidelity ETFs. 

Tracking Basket Info:

Although the Tracking Basket is intended to provide investors with enough information to allow for an effective arbitrage mechanism that will keep the market price of the Fund at or close to the underlying NAV per share of the Fund, there is a risk (which may increase during periods of market disruption or volatility) that market prices will vary significantly from the underlying NAV of the Fund; ETFs trading on the basis of a published Tracking Basket may trade at a wider bid/ask spread than ETFs that publish their portfolios on a daily basis. This is especially true during periods of market disruption or volatility, and therefore, may cost investors more to trade.

Although the Fund seeks to benefit from keeping its portfolio information secret, market participants may attempt to use the Tracking Basket to identify a fund’s trading strategy, which, if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the Fund and its shareholders. Because shares are traded in the secondary market, a broker may charge a commission to execute a transaction in shares. An investor may incur the cost of the spread between the price at which a dealer will buy shares and the price at which a dealer will sell shares.

Fidelity Investments® is an independent company, unaffiliated with VettaFi. There is no form of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments. Nor is such a relationship created or implied by the information herein. Fidelity Investments has not been involved with the preparation of the content supplied by VettaFi. It does not guarantee, or assume any responsibility for its content.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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