Fidelity expands ETF partnership with BlackRock

BOSTON, March 13 Wed Mar 13, 2013 9:31am EDT

BOSTON, March 13 (Reuters) - Fidelity Investments expanded its 3-year-old partnership with BlackRock Inc to offer its customers free trading of more exchange-traded funds, as the once-dominant mutual fund company strives to catch up in a faster-growing market.

Fidelity brokerage customers will be able to trade 65 BlackRock iShares ETFs without paying a commission, up from 30 funds currently, the two firms said on Wednesday.

BlackRock will also help Fidelity develop an investment strategy for clients based on a mix of ETFs and will support some of the firm's own efforts to start a new line of equity sector ETFs.

Boston-based Fidelity, which manages some $1.7 trillion mostly in mutual funds, has largely been left behind in the ETF explosion of the past decade.

By contrast, BlackRock acquired top ETF provider iShares in 2009. Among its nearly $4 trillion of total assets, it oversees $708 billion of ETFs.

Neither BlackRock nor Fidelity would say how many customers have used the free trading program over the past three years or how much money they have invested in iShares funds.

New York-based BlackRock pays Fidelity marketing fees for the commission-free ETF transactions as part of the deal.

The company said it wanted more access to Fidelity's millions of brokerage customers and to registered investment advisers who use Fidelity's platform.

"When you're in a multiyear partnership with the world's leader, it makes a lot of sense to double down," said Mark Wiedman, global head of BlackRock's iShares unit.

The move follows Charles Schwab Corp's announcement last month of a free trading platform for 105 ETFs from six providers but not BlackRock. Participants included State Street Corp, the second-largest manager of ETFs; Invesco's PowerShares; and Schwab's own small ETF lineup.

Fidelity's expanded partnership with BlackRock was not a response to the Schwab offering, said Kathleen Murphy, president of personal investing at the Boston-based firm.

"We've been proactive from the start," she said. "We're not being reactive."

Fidelity manages a single, small ETF but has filed plans with the U.S. Securities and Exchange Commission to offer a line of equity sector funds, including some that would be actively managed instead of passively tracking market indexes.

Under Wednesday's expanded deal, BlackRock will provide support for Fidelity's passive sector funds, while Fidelity concentrates on the actively managed ETFs, Murphy said. She declined to provide further details.

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