| BOSTON, July 26
BOSTON, July 26 Fidelity Investments disclosed
on Friday its plans to use U.S. money manager BlackRock Inc
as subadviser on a slate of 10 new sector-oriented
The disclosure follows up a previously stated plan to have
BlackRock help Fidelity develop its own line of equity sector
"The filing for 10 passive sector ETFs builds on our 30
years of experience in sector investing," Fidelity spokesman
Nicole Goodnow said.
Early last month, Fidelity planned to make a major
announcement about its ETF strategy, but canceled it after
getting hung up with regulators, according to people familiar
with the situation.
Boston-based Fidelity is best known for actively managed
mutual funds like Contrafund and Magellan,
but the company has lagged rivals BlackRock, Vanguard Group and
State Street Corp by several years in rolling out an ETF
There are now more than 1,200 U.S. ETFs with assets totaling
$1.4 trillion, up from assets of about $140 billion 10 years
ago. As of June 30, BlackRock had $575 billion in ETF assets,
followed by State Street ($318 billion) and Vanguard ($277
billion), according to State Street Global Advisors. Those three
firms account for about 82 percent of the U.S.-listed ETF
ETFs have become popular with investors because they trade
like stocks and their fees are much lower than actively managed
mutual funds. In recent financial statements, Fidelity has
acknowledged how a shift to ETFs and index funds could have an
adverse effect on the company's investment management revenue.
Fidelity registered 10 ETFs in which BlackRock would act as
subadviser, according to a preliminary prospectus filed on
Friday. No fees were disclosed for ETFs that would follow
sectors such as consumer staples, energy, banks, healthcare,
utilities and telecommunications. The ETFs have not yet been
approved by the Securities and Exchange Commission.
In March, Fidelity said it expanded its three-year-old
partnership with BlackRock 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's ETF initiative is being run out of Denver by
former State Street Global Advisors executive Anthony Rochte.