Fidelity Practically a “No Show” in ETF Arena

23 October 2006

By: David Hoffman, Investment News
Published: October 23, 2006

Smaller events on the PGA and ATP Tours always have a problem attracting the big names.  Take, for example, the Canadian stop on the ATP Tour.  It seems that every year the top players fall victim to some freak injury right before the Rogers Cup.  Thankfully, they always recover by the next weekend when they are able to compete in the (much more lucrative) US Open.   Ditto for golf’s Canadian Open. 

But the ETF industry is no Canadian Open.  As this article shows, the ETF sector is the Masters of the investment management industry.  So why has Fidelity taken a pass?

Like the “accident-prone” athletes above, Fidelity might just be making so much money on its active management that it can afford to take a pass.  Or, like these athletes, it may be just saving itself for the big show:

‘…But the truth is that Fidelity has been focused elsewhere, said Tom Lydon, president of Global Trends Investments, a financial advisory firm in Newport Beach, Calif.

“‘The majority of the new assets into Fidelity come from retirement plan relationships,’ he said. ‘At this point in time, there is some pressure for large 401(k) plans to offer ETF options, but it’s not great.’

“Put another way, Fidelity can make more money as an active manager than as a manager of passive ETFs, industry experts say.”

Bottom line:  Seems like Fidelity has decided alpha/beta bifurcation is good, but that someone else can provide the beta.  Only time will tell if forcing the other half of a client’s portfolio into the arms of a competitor is a wise strategy.    

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