Fidelity Investments has converted six of its actively managed Enhanced Index mutual funds into ETFs.
The six commission-free ETFs are the Fidelity Enhanced Large Cap Growth ETF (FELG), the Fidelity Enhanced Large Cap Value ETF (FELV), the Fidelity Enhanced Mid Cap ETF (FMDE), the Fidelity Enhanced Small Cap ETF (FESM), and the Fidelity Enhanced International ETF (FENI).
“These funds fit exactly what we’re looking for [because] they’re active in nature, they’re transparent, and they have a great track record,” said Greg Friedman, head of ETF management and strategy at Fidelity. “Our clients are enjoying them in their current form, but we think they will like them even better in an ETF form.”
The latest conversions follow a similar process that took place in June, when the Boston-based firm converted six of its disrupter ETFs.
“We want to be a leader in active ETFs both in fixed income and equity,” Friedman said. “So, the first conversion and these conversions are steps toward that end goal.”
The six recently converted ETFs are managed by Anna Lester, Max Kaufmann, and Shashi Naik as they had when they were mutual funds, according to the firm. The plan is to maintain the same strategy that has worked for the funds in the past, according to Friedman.
“They look at non-traditional signals across valuation, growth, [and] profitability to create an algorithm that can be applied to different market cycles with the goal of outperforming their index,” he said.
The firm is positioning all 12 converted ETFs as the first half of a core strategy to act as building blocks in a portfolio.
Fidelity is also looking to be competitive with the ETFs when it comes to price, as FESM and FENI will have a 28 basis-point management fee, FMDE will be 23 basis points, and the rest will be 18 basis points, the firm said.
“It is a very low cost in terms of an active type of product so those are great uses for people as a core to the portfolio,” Friedman said. “It gives you exposure to the U.S., mid-cap, small cap, international, and you can fill it with some of the other satellite features or products that we have.”
