Fidelity Investments®, a leading global asset management firm with $1.9 trillion in managed assets,2 today announced it has significantly expanded its sector investing platform for investors and financial advisors with the introduction of the company’s first suite of passive sector exchange traded funds (ETFs).
Fidelity’s 10 new passive sector ETFs will commence trading on the New York Stock Exchange today, October 24, 2013, at 9:30 a.m. Eastern Time. These ETFs will be the lowest-cost passively managed sector ETFs in the industry3 with total expense ratios of just 0.12 percent4 -- nearly 80 percent below the industry average for passive sector ETFs5. In addition, investors and registered investment advisors (RIAs) can purchase Fidelity’s ETFs commission-free online* through one of Fidelity’s brokerage platforms.
Fidelity, which has more than 30 years of global sector investing experience, currently offers 44 actively managed sector mutual funds with more than $50 billion in assets6, the industry’s largest lineup of sector mutual funds.7 This new suite of sector ETFs complements the firm’s sector mutual funds, ensuring that investors have access to both actively managed and passively managed products.
“Since the financial crisis five years ago, investors and advisors have told us that they are looking for additional ways to diversify their portfolios and get exposure to specific industries outside of the typical cap-weighted or style specific options such as large or small cap, or growth and value,” said Anthony Rochte, president of SelectCo, the company’s dedicated sector investing division. “Our new passive sector ETFs can provide for that diversification, serving as building blocks to help investors and advisors find new ways of generating alpha through asset allocation and better manage portfolio risk.”8
Fidelity is also making it easier for investors and advisors to learn more about the growing field of sector investing through the creation of sector-specific micro sites. These sites make it easy to access Fidelity’s latest sector thought leadership, research, guidance tools and education.
“It’s not enough to just provide new products today,” said Ram Subramaniam, president of Fidelity Brokerage. “To help our 10 million brokerage customers better understand sectors and make more informed investment decisions, we knew we needed to develop a world-class sector platform that brings together investment insights, research, education and highly customizable screeners for finding sector stocks, ETFs and mutual funds.”
10 Fidelity Passive Sector ETFs
With total expense ratios of just 0.12 percent, the new Fidelity ETFs are the industry’s lowest cost passive ETFs tracking the 10 major equity sectors -- consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication services and utilities9. Fidelity’s 10 new passively managed sector ETFs are:
|Fidelity Passive Sector ETF|
|Ticker||Total Expense Ratio|
Fidelity MSCI Industrials Index ETF
MSCI USA IMI Industrials Index
Fidelity MSCI Health Care Index ETF
MSCI USA IMI Health Care Index
Fidelity MSCI Financials Index ETF
MSCI USA IMI Financials Index
Fidelity MSCI Information Technology Index ETF
MSCI USA IMI Information Technology Index
Fidelity MSCI Telecommunication Services Index ETF
MSCI USA IMI Telecommunication Services 25/50 Index10
Fidelity MSCI Consumer Discretionary Index ETF
MSCI USA IMI Consumer Discretionary Index
Fidelity MSCI Consumer Staples Index ETF
MSCI USA IMI Consumer Staples Index
Fidelity MSCI Energy Index ETF
MSCI USA IMI Energy Index
Fidelity MSCI Materials Index ETF
MSCI USA IMI Materials Index
Fidelity MSCI Utilities Index ETF
MSCI USA IMI Utilities Index
As part of a broader strategic ETF relationship announced earlier this year, Fidelity has hired BlackRock as sub-adviser for its 10 passive sector ETFs, leveraging the firm’s passive investment management capabilities and scale.
MSCI is the benchmark provider for Fidelity’s new 10 passive sector ETFs. Fidelity selected MSCI, widely recognized for its global equity indexes, because of its transparent methodology and broad market coverage. The benchmarks for the new sector ETFs cover about 99 percent of the U.S. investable equity market, including small cap stocks.
“We know the demand for specialized sector products and solutions, especially through advisors, will only continue to expand and evolve,” said Scott E. Couto, president of Fidelity Financial Advisor Solutions. “To ensure we continue to meet our customers’ needs in this area, Fidelity is putting intense, dedicated focus on extending its already industry-leading sector capabilities with new products and added resources.”
Fidelity has already filed preliminary registration statements with the U.S. Securities and Exchange Commission (SEC) for five actively managed fixed income ETFs, which are pending approval. Once launched, these new ETFs will be managed by investment professionals in Fidelity’s Fixed Income division in Merrimack, NH.
New Sector Investing Education and Tools
Recognizing that sector investing is still a relatively new area for many investors, the firm has created dedicated micro sites on fidelity.com and advisor.fidelity.com, where investors and advisors can find in-depth sector and industry research, market commentary, sector and industry performance, third-party sector weighting recommendations and other information.
Fidelity also introduced a new series of educational sessions within the Fidelity Learning Center on fidelity.com, where investors can take sector-specific courses, read articles and participate in webinars -- all to get a better sense of what sectors are and how they can fit into their investment strategies.
Additionally, Fidelity has made a new sector investing tool available on fidelity.com. The Sector Portfolio Builder tool allows investors to build and model hypothetical sector-based portfolios, as well as compare the historical performance and risk of those portfolios to benchmark indices.
New Sector Thought Leadership Report Challenges Traditional Cap- and Style-Specific Investing
Fidelity has authored a new investment insights report, “Equity Sectors: Essential Building Blocks for Portfolio Construction.” Available to both investors and advisors, the report demonstrates how a sector-based framework can be an effective approach to equity portfolio construction.
According to Fidelity’s analysis, while company-specific factors have been the top driver of stock returns in the U.S. equity market over the past 20 years, sector exposure has been the second most influential driver, accounting for roughly 22 percent of U.S. equity market returns, as measured by the Russell 3000 Index, more than style and market cap combined.11
Fidelity’s new report also discusses how sectors can be used as portfolio construction building blocks through a variety of different investment strategies, including fundamental analysis, business cycle approach and portfolio overlay.
This is the eleventh sector thought leadership paper Fidelity has published this year. The 10 prior papers include: State of the Sector: Consumer Staples, State of the Sector: Information Technology, State of the Sector: Industrials, State of the Sector: Materials, State of the Sector: Energy, State of the Sector: Financials, State of the Sector: Telecommunication Services, State of the Sector: Health Care, State of the Sector: Utilities and State of the Sector: Consumer Discretionary.
About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.4 trillion, including managed assets of $1.9 trillion, as of September 30, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.
Free commission offer applies to online purchases of Fidelity ETFs in a Fidelity brokerage account with a minimum opening balance of $2,500. The sale of ETFs are subject to an activity assessment fee (of between $0.01 to $0.03 per $1,000 of principal) by Fidelity. After 02/01/2014, Fidelity ETFs are subject to a short-term trading fee by Fidelity, if held less than 30 days.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.
Because of their narrow focus, sector funds tend to be more volatile than funds that diversify across many sectors and companies.
Fidelity, Fidelity Investments, Fidelity Investments and the pyramid logo, are registered service marks of FMR LLC.
The third party trademarks appearing herein are the property of their respective owners.
It is not possible to invest directly in an index.
The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities or any index on which such funds or securities are based. The prospectuses for each of the 10 Fidelity passive sector ETFs contains a more detailed description of the limited relationship MSCI has with Fidelity and any related funds.
Before investing in any mutual fund or exchange traded fund, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.
Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917
Fidelity Investments Institutional Services Company, Inc.,
500 Salem Street, Smithfield, RI 02917
Clearing, custody or other brokerage services may be provided by National Financial Services LLC, or Fidelity Brokerage Services LLC. Members NYSE, SIPC. 200 Seaport Blvd, Boston, MA 02210.
© 2013 FMR LLC. All rights reserved.
1 Strategic Insight SimFund/FI Desktop, data as of 8/31/2013. Based on a comparison of total expense ratios for U.S. sector level ETFs with similar holdings and investment objectives (using the MSCI and S&P Global Industry Classification System — GICS®) within the universe of 298 ETFs Morningstar has classified as the Sector Stock asset class.
2 As of September 30, 2013.
3 Strategic Insight SimFund/FI Desktop, data as of 8/31/2013. Based on a comparison of total expense ratios for U.S. sector level ETFs with similar holdings and investment objectives (using the MSCI and S&P Global Industry Classification System – GICS) within the universe of 298 ETFs Morningstar has classified as the Sector Stock asset class.
4 The percentage of fund assets used to pay for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund, except brokerage costs. Fund expenses are reflected in the fund’s NAV. Sales charges are not included in the expense ratio.
5 Strategic Insight SimFund/FI Desktop, data as of 8/31/2013. Based on a comparison of total expense ratios for U.S. sector level ETFs with similar holdings and investment objectives (using the MSCI and S&P Global Industry Classification System – GICS) within the universe of 298 ETFs Morningstar has classified as the Sector Stock asset class.
6 As of July 31, 2013.
7 Morningstar Direct as of Oct. 8, 2013.
8 References to risk or volatility are expressed by standard deviation of returns, unless otherwise noted.
9 As defined by the Global Industry Classification Standard (GICS) methodology, a leading sector classification.
10For a fund to qualify as a regulated investment company (RIC) it must o comply with the US Internal Revenue Code diversification and income constraints.
11 Based on rolling 12-month analysis of variance (ANOVA), which uses statistical models to attribute the variance of a variable (stock returns in the Russell 3000) to certain factors (sector, style, market cap). The residual is attributed to other company-specific factors. Source: Fidelity Investments as of Dec. 31, 2012.
* Free commission offer applies to online purchases of Fidelity ETFs in a Fidelity brokerage account with a minimum opening balance of $2,500. The sale of ETFs are subject to an activity assessment fee (of between $0.01 to $0.03 per $1,000 of principal) by Fidelity. After 02/01/2014, Fidelity ETFs are subject to a short-term trading fee by Fidelity, if held less than 30 days.
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