Fidelity Investments seems to be slowly but surely moving toward a major expansion of its ETF business.
The Boston-based financial services giant has filed to launch active ETFs that would invest in corporate bonds and mortgage-backed securities, report Cinthia Murphy and Olly Ludwig at IndexUniverse.
According to a recent SEC filing, Fidelity is planning an actively managed Fidelity Mortgage Securities ETF , which will hold investment-grade mortgage-related securities and repurchase agreements for those securities. [Fidelity Cleared to Launch Active ETFs: Report]
Specifically, the mortgage securities ETF will invest in U.S. government securities and will have similar overall interest rate risk to the Barclays U.S. MBS Index.
Additionally, the fund managers will allocate assets across varying market sectors and maturities and analyst credit quality of the issuer, current and future valuations, and trading opportunities.
The fund can also utilize derivatives, forward-settling securities, interest rate swaps, total return swaps, credit default swaps, options and futures contracts to increase or decrease the fund’s exposure to changing security prices, interest rates, credit qualities or other factors.
Additionally, Fidelity filed with the SEC to launch the actively managed Fidelity Corporate Bond Exchange Traded Fund , which will hold domestic and foreign investment grade corporate bonds and other corporate debt with similar interest rate risk to the Barclays U.S. Credit Bond Index. The fund can also hold lower-quality debt and derivatives, like swaps, options and futures contracts.
The SEC lifted the moratorium on derivatives in active ETFs last December. The ban began in March 2010 and left some applications in a holding pattern for two years or more as they waited for exemptive relief. [Several Fund Firms Eyeing Active ETFs]
Fidelity currently manages one ETF, Fidelity Nasdaq Composite Index (ONEQ) .
For more information on active ETFs, visit our actively managed ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.