Fidelity International has launched a range of six index funds, which will be marketed in 18 European countries. Five products replicate MSCI equity indices in different geographic regions (Europe, Japan, World, Pacific ex-Japan and emerging markets), the sixth targets the US S & P 500 index. The announcement may surprise: Fidelity International (not to be confused with the American company Fidelity Investments) has, of course, launched in 2017 a range of so-called “smart beta” ETFs, but the management company is best known in Europe for its actively managed funds.
Yet, as Dorcas Phillips, Head of ETF at Fidelity International, points out, “The first UK-based Fidelity index fund was launched in 1996”. The management of the six new funds, using a physical replication method, will actually be entrusted to Geode Capital Management, Fidelity’s key partner in the US market, which already manages more than $350 billion in assets, particularly in indexing strategies.
It remains to be seen how Fidelity hopes to impose such products especially with the surge of ETF in recent years. In fact, Fidelity plays on a club argument: the price. Outstanding charges range from 0.1% to 0.2% per annum for the five MSCI products and fall to 0.06% per annum for the S & P500 replicating fund. This is even cheaper than the 0.0945% fee levied by the ETF SPDR S & P 500 marketed in the US market.
Unlike ETFs, Fidelity’s new index funds will not be tradable on the stock exchange, but they reflect some of their principles, including identical management fees for all types of investors. While the price war is raging between ETF providers, Fidelity shows that the “low cost” offer can also come from traditional managers. This very aggressive pricing illustrates quite well the recent remarks made by Bart Grenier, Global Head of Asset Management at Fidelity International, at a press conference in London. He mentioned the possibility of modulating the pricing of funds according to the liquidity demanded by investors. By having a little less liquidity than on an ETF, future customers of this new range can expect a lower price.