Fidelity Investments, one of the country's largest asset managers, is making its first foray into converting some of its mutual funds into ETFs.
The Boston-based firm on Nov. 23 revealed
The conversion would bring its active equity ETF lineup to 15 funds from an existing nine. The current funds had about $720 million in assets under management as of Oct. 31, while the assets of the six thematic mutual funds total roughly $430 million, according to emailed comments from a Fidelity spokesperson.
In the coming decade, more than $1 trillion worth of mutual fund assets could be converted into ETFs, according to an analysis by Bloomberg Intelligence. That would represent a huge boost to the $6.5 trillion U.S. ETF market.
The new ETFs will each have an expense ratio of 0.50%, which is roughly the industry average. Ahead of the conversion, the mutual funds' expense ratio will be slashed to 0.50% from 1% on or about April 1, 2023.
"Fido has little to lose with this conversion," Bloomberg Intelligence's Henry Jim said, referring to Fidelity. "They are giving up half the fees on a relatively small asset base and in return they are getting a suite of thematic ETFs that are cheaper to run and easier to sell to a broader client base."
The trend of mutual fund conversion gained traction last year after Dimensional Fund Advisors completed one of the first formal attempts in
Tax efficiency is frequently cited as a reason to make the switch.
"A growing number of investors are seeking the tax efficiency, trading flexibility and potential cost efficiency benefits of ETF vehicles," Greg Friedman, Fidelity's head of ETF management and strategy, said in a statement.
All converted ETFs will be led by the same portfolio managers as the mutual funds, the firm said in a