Fidelity on Tuesday announced it would offer free trades on 25 iShares exchange-traded funds in a partnership with BlackRock ( BLK). The move will help the mutual fund giant cultivate a stickier customer base and stay relevant in the exploding age of ETFs. While I recently noted that a departing Fidelity executive hinted at proprietary funds ( Fidelity Hints It May Get Into ETFs), today's announcement is a major milestone for the Boston behemoth. The 25 funds are a predictable bunch, including big-name index brands that could be mistaken for mutual funds at first glance. BlackRock acquired iShares in June. The iShares Russell 1000 ( IWB) , iShares S&P 500 ( IVV) and iShares S&P Growth ( IVW) will all offer Fidelity traders inexpensive exposure to well-known indices. Not to be boring, Fidelity will also offer access to other heavily traded ETFs. Also available commission-free will be the iShares MSCI Emerging Markets ( EEM), iShares TIPs ( TIP) and the iShares iBoxx Investment Grade Corporate Debt ( LQD) ETFs.
Too Little, Too Late?
Fidelity's announcement may be an admission of missed opportunities in the ETF space. Vanguard, a competitor in the mutual fund space, has already transformed the ETF industry with low-cost iShares knock-offs. While Vanguard's most popular funds may not be examples of original thinking, they have shattered the mold in an industry where first-mover status is king. The Vanguard Emerging Markets Stock ETF ( VWO), which goes head-to-head with iShares' EEM, raked in $1.2 billion in 2009, according to data from the National Stock Exchange. EEM, which was introduced earlier, netted $941 million. The first lesson Fidelity must learn is that ETF investors are a discerning bunch. If they are presented with an identical product at a lower price point, they know how to bargain-hunt.