Nick King, Head of ETFs at Fidelity, reveals how the group is planning to expand its ETF range in the coming years and why innovation is key to the sector's success
Fidelity hired Nick King, who joined the group as Head of ETFs from market leader BlackRock iShares, to establish a new ETF capability for them in 2016, as the group looked to make its first mark in the passive space. Since then, the team based in London and Hong Kong, have leveraged resources from across the firm to help build a new range of differentiated ETF products.
"Our clients increasingly use a combination of active, passive and systematic products to build their portfolios. There are cases where paying for alpha makes sense, and others where clients simply need the most straightforward, low-cost way of gaining access to a market," explains King. "Fidelity believes in offering our clients the flexibility to choose from a range of best in class investment tools whatever solution they're looking for."
King believes the rapid growth of the ETF market in recent years has been driven by a number of factors, including the growth of index investing generally but also the convenience that the wrapper provides: "Market conditions have been very positive for passive investing. Over the past 10 years, the MSCI ACWI index has returned nearly 12% per annum. When returns from market beta are so high, it is easy for alpha to be overlooked. In addition, the volatility and dispersion of stock returns has been low, making it more difficult for active managers to outperform."
Regulatory changes have provided a further tailwind he adds: "Conduct rules aimed at enhancing consumer protection are driving markets towards a fee based advice model, which in turn highlights costs for clients and ultimately has increased the popularity of lower cost investment strategies."
Yet King notes that building the ETF business at Fidelity has not been easy in the highly regulated and competitive environment the asset manager finds itself in today. "Building an ETF business is challenging and it is a very competitive market. The resources, relationships and brand of Fidelity have been critical for us to make progress. We also realised early on that it was essential that the products we brought to market were differentiated from what is already out there."
To read the full interview with Nick King in The ETF Evolution magazine, and learn more about how they are building their Quality Income ETF range, click here.