MutualFundWire.com: Fidelity Inks an ETF Deal

MutualFundWire.com

The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication

Tuesday, February 2, 2010

Fidelity Inks an ETF Deal

Starting tomorrow, Fidelity will offer 25 iShares ETFs commission-free (see the complete list below). Fidelity's move comes three months after Schwab announced it was making proprietary ETFs available sans commission.

"We believe this is the best deal on ETFs in the industry," Fidelity spokesman Adam Banker told The MFWire. "We chose to partner with the undisputed ETF leader."

Sought for comment on Fidelity's move, Schwab spokesperson David Weiskopf told The MFWire: "As the old expression goes, imitation is the greatest form of flattery."

"We appreciate the decision Fidelity has made to follow Schwab's lead in the ETF space and trading commissions," Weiskopf added.

Fidelity also announced on Tuesday that it will lower U.S. online equity commissions to $7.95 for all customers effective February 3.

The Boston Behemoth has one proprietary ETF, the Fidelity Composite Index Tracking Index, and that will also be available commission-free. Schwab, for its part, entered the ETF business last November and now has eight proprietary ETFs.

Fidelity offers 200 iShares ETFs, of which 25 --including iShares S&P 500 Index Fund and iShares Russell 2000 Index Fund -- will be commission-free. The Boston Behemoth also offers 600 ETFs from more than 40 other providers, which investors can trade for $7.95 on Fidelity.com.

Fidelity's deal with BlackRock, which purchased iShares and the rest of Barclays Global Investors last year, will be in effect for at least three years.

The 25 iShares ETFs "enable broad diversification and may be appropriate for many portfolios," Banker said. Those ETFs collectively hold more than $200 billion of assets.

Down the road, does Fidelity plan to increase the number of commission-free iShares and make similar arrangements with other ETF providers? "We will monitor the success of the program before making any additional decision," Banker said.

In a separate interview, Mike Latham, head of the U.S. iShares business, said that at present, less than 10 percent of iShares assets come from the online brokerage channel.

"This is a great endorsement for iShares," Latham said of the Fidelity deal.

Asked how the deal came about, Latham said: "It started with Fidelity's recognition that ETFs are continuing to grow. A few months ago, they approached us to discuss strategic opportunities for us to work together."

The 25 commission-free iShares ETFs are:

iShares S&P 500 Value (IVE)

iShares Russell 1000 Value (IWD)

iShares S&P MidCap 400 Value (IJJ)

iShares S&P SmallCap 600 Value (IJS)

iShares Russell 2000 Value (IWN)

iShares S&P 500 (IVV)

iShares Russell 1000 (IWB)

iShares Russell 3000 (IWV)

iShares S&P MidCap 400 (IJH)

iShares S&P SmallCap 600 (IJR)

iShares Russell 2000 (IWM)

iShares S&P 500 Growth (IVW)

iShares Russell 1000 Growth (IWF)

iShares S&P MidCap 400 Growth (IJK)

iShares S&P SmallCap 600 Growth (IJT)

iShares Russell 2000 Growth (IWO)

iShares MSCI EAFE (EFA)

iShares MSCI EAFE Small Cap (SCZ)

iShares MSCI Emerging Markets (EEM)

iShares MSCI ACWI (ACWI)

iShares Barclays TIPS (TIP)

iShares Barclays Aggregate (AGG)

iShares iBoxx $ Investment Grade Corporate (LQD)

iShares JP Morgan USD Emerging Markets (EMB)