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Portfolio > Asset Managers

Fidelity Files for 4 New Thematic ETFs

By Bernice Napach

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What You Need to Know

  • The ETFs focus on four themes: clean energy, cloud computing, digital health and electric vehicles.
  • They are all passive funds based on Fidelity's proprietary indexes.
  • Trading could start as soon as Sept. 21.

Fidelity Investments is expanding its roster of ETFs with four new thematic funds.

It has filed a registration statement with the Securities and Exchange Commission to launch a clean energy ETF, cloud computing ETF, digital health ETF and electric vehicles and future transportation ETF. All four are index ETFs that will trade on the Cboe and be managed by the same team, led by senior portfolio managers Deane Gyllenhaal and Louis Bottari working with portfolio managers Peter Matthew, Robert Regan and Payal Gupta.

They can invest across the market capitalization spectrum  and in domestic, international and emerging market stocks and ADRs. Expense ratios are not yet available. The expected launch date is 75 days after the SEC filing, which is Sept. 21. Fidelity Management & Research Co. is the funds’ manager and Geode Capital Management LLC, which was spun off from Fidelity years ago, serves as sub-advisor.

“Thematic ETFs are one of the big growth stories of the year,” said Dave Nadig, the chief investment officer and director of research at ETF Trends and ETF Database. “Flows are over $30 billion in the first half, which is far more than any other individual sector.”

Thematic ETFs focus on predicted long-term trends rather than specific sectors or companies, providing access to major shifts in the economy and industries or market. Ark Investment Management is a prime example of a fund manager focused on thematic investing with myriad ETFs targeting disruptive technologies such as genomic research, electric cars and fintech innovation. But many traditional asset managers have also launched thematic funds, including not only Fidelity, but also Invesco, Goldman Sachs, Putnam Investments and others.

“It’s not really surprising to see some of the later entrants focusing on something other than actively managed funds,” said Nadig.

Fidelity’s Four Planned Thematic ETFs

The four Fidelity thematic ETFs are based on Fidelity’s rule-based indexes, which favor companies that generate at least 50% of their total revenue from one or more of the industries included in each index. Each ETF will invest at least 80% of its assets in securities included in their relevant indexes.

“Fidelity is likely leveraging their fundamental equity research team to help with the index construction and to support investor education about the drivers,” said Todd Rosenbluth, head of ETF & mutual fund research at CFRA. “This is similar to what they’ve done with smart beta ETFs like FVAL and FDRR.”

Here’s a rundown of the four Fidelity thematic ETF filings:

  • Fidelity Clean Energy ETF: Based on the Fidelity Clean Energy Index, which favors companies that includes clean energy distributors, clean energy equipment manufacturers and clean energy technology providers.
  • Fidelity Cloud Computing ETF: Based on the Fidelity Cloud Computing Index, consisting of companies involved in cloud infrastructure, cloud platforms and cloud software.
  • Fidelity Digital Health ETF: Based on the Fidelity Digital Health Index, consisting of digital healthcare products and services and connected medical devices.
  • Fidelity Electric Vehicles and Future Transportation ETF: based on Fidelity Fidelity Electric Vehicles and Future Transportation Index, which consists of companies engaged in the production of electric and/or autonomous vehicles and their components, technology, or energy systems or engaged in other initiatives that aim to change the future of transportation.

Bernice Napach

@Think_Napach

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