By Dmitry Demidovich @ Shutterstock.com
Fidelity has announced that it will convert six of its mutual funds into exchange traded funds (ETFs), joining other mutual fund companies in a growing trend. The ETFs will come with lower fees for customers. Sonya Swink reports for the Financial Times:
Fidelity plans to convert a set of six “disruptive technologies” mutual funds to exchange traded funds next June, the firm has disclosed.
These will be the first mutual funds that Fidelity will turn into ETFs, a company spokesperson said.
The $96mn Fidelity Disruptors, $91mn Fidelity Disruptive Automotive, $80mn Fidelity Disruptive Technology, $48mn Fidelity Disruptive Finance, $47mn Fidelity Disruptive Medicine and $34mn Fidelity Disruptive Communications mutual funds will become ETFs with the same name by June 16, the filing says.
The funds’ strategies will not change, and each will maintain the same investment objectives as their predecessor mutual funds, a company statement said.
About two months before the conversions occur, the funds’ management fees will drop to 50 basis points, the filing says. The management fee for the Disruptive Communications Fund is currently 99bs, and the other five funds charge 100bp management fees, fund prospectuses show.
The mutual funds are currently offered in retail, loyalty and F-share classes. Loyalty shares are available for investors who buy their shares through Fidelity accounts and have held their retail shares in the same account for a certain amount of time. The fee drops once the investor hits the three-year mark. Class F shares are not offered to the public.
Current shareholders of each fund will receive ETF shares equal in value to the number of shares of the mutual funds they own, the filing says.
The move “reinforces our commitment to growing our line-up with innovative strategies that help meet the evolving needs of investors”, said Greg Friedman, the firm’s head of ETF management and strategy, in a statement. The conversions aim to meet the demand of a “growing number of investors” who seek the tax efficiency and freedom within the ETF wrapper, he noted.
In early 2021, Guinness Atkinson became the first fund sponsor to convert mutual funds into ETFs, by transforming its Dividend Builder and Asia Pacific Dividend Builder funds.
Read more here.
