More on Fidelity and ETFs

By Matthew Hougan

Fidelity has an ETF the way my father has a Betamax: forgotten, regretted and stuffed in the corner of a closet somewhere.

OK, maybe that's harsh. But the $90 million Fidelity Nasdaq Composite Index Tracking stock (Nasdaq: ONEQ) certainly feels like an afterthought.  Fidelity launched it in 2003, the perfect time for making a major move into the ETF market. The industry at that time had just over $100 billion in total assets under management, split between 100-120 ETFs. With its reach, Fidelity could have quickly become a major player in what is now a $600 billion market with more than 700 listed funds.

Instead, it stuck with just one fund tied to an exchange-focused index and ... that's it.

It's not too late for Fidelity. With its history of active management, the company would be crazy if it wasn't talking RIGHT NOW to all the people working on non-transparent active ETF platforms: the American Stock Exchange, Gary Gastineau, Next Investments, etc.

It seems to me that the big fund companies can no longer ignore the potential of ETFs. ETFs have shifted the investing landscape, particularly among financial advisors, who are embracing the new funds for their low costs and tax-efficiency. It's a classic case of a disruptive technology, and the big fund companies are leaving themselves wholly exposed to a major risk if they don't move into the space seriously ... and soon.

PIMCO, I think, shows that.

Comments

[keneaise:]

Couldn't agree more! All my cash is at Fidelity but I've gone from using mostly their funds to being entirely in ETFs. They need to get on board ASAP. Ignoring a market this size is lunacy.

2008 Aug 08 01:00 PM

[Aquater:]

Big mutual fund families stink, with their stupid trade restricting hypocritical rules (while they themselves trade freely and hopelessly, as ever). Let them stay static where they are stuck in their self-created mud. I have shifted to ETF's long ago and will stay there, watching these dynasaurs die their slow death.

2008 Aug 09 01:33 PM

[adan:]

hard to imagine fidelity won't, eventually, go big time into their own etf's

smart move on pimco's part i think

2008 Aug 10 12:16 AM

[Alpha Seeker:]

yeap, FRC in Boston mapped out how the big fund families can benefit from that...

2008 Aug 11 09:59 PM