Fidelity to Launch 5 New Active ETFs, Cuts Fee on High Yield ETF

Fidelity Investments is expanding its lineup of exchange-traded funds with the addition of five actively-managed equity ETFs. It is also slashing fees on an existing fund, the company said Thursday.

The expanded ETF lineup comes amid a shifting landscape in the asset management industry. Investors increasingly favor ETFs over mutual funds because they are easy to trade and tax-efficient. As a result, asset managers have raced to launch new active ETFs. This year 328 have launched as of Sept. 30, according to Morningstar.

Fidelity’s new funds are Fidelity Enhanced U.S. All-Cap Equity ETF (FEAC), Fidelity Enhanced Emerging Markets ETF (FEMR), Fidelity Fundamental Developed International ETF (FFDI), Fidelity Fundamental Global ex-U.S. ETF (FFGX), and Fidelity Fundamental Emerging Markets ETF (FFEM).

The ETFs generally have low gross expense ratios: 0.18% for FEAC, 0.38% for FEMR, 0.55% for FFDI and FFGX, and 0.60% for FFEM, according to Fidelity.

The company says the ETFs are available commission-free for individual investors and financial advisors through Fidelity’s online brokerage platforms Thursday.

Greg Friedman, head of ETF management and strategy at Fidelity Investments, said the company’s new ETFs were intended to offer investors “differentiated actively managed investment products.”

Additionally, Fidelity said it is renaming Fidelity High Yield Factor ETF as Fidelity Enhanced High Yield ETF (FDHY), and cutting the total expense ratio to 0.35% from 0.45%. The company says it renamed the fund to better reflect the fund’s active investment strategy.

Fidelity, which is based in Boston, is one of the nation’s largest wealth management and retirement plan companies. It has a large brokerage platform for retail investors and custodies assets on behalf of independent financial advisors. Fidelity says it has assets under administration of $15 trillion, including discretionary assets of $5.8 trillion, as of Sept. 30.

Fidelity has 76 exchange-traded funds and products with $93 billion in assets under management. It says its portfolio construction team analyzes thousands of professionally-managed portfolios, and has seen a steady rise in financial advisors allocating client assets to active ETFs.

Fidelity isn’t the only asset manager responding to the shift toward ETFs. Asset managers have been leaning into the products in part because of investor demand for active strategies in an ETF format and as a way to cope with outflows in active mutual funds. Earlier this month, rival Charles Schwab said it would launch a new actively-managed fixed income ETF in early 2025. The Schwab Core Bond ETF is the company’s third active ETF.

Vanguard has also launched several active ETFs in recent years and placed renewed emphasis on fixed income. In August, Vanguard said it would add two active muni bond ETFs: Vanguard Core Tax-Exempt Bond and Vanguard Short Duration Tax-Exempt Bond.

Write to Andrew Welsch at [email protected]