Fidelity Launches Innovative ETF Model Portfolios What Investors Should Know

In the dynamic and fast-paced world of investments, asset management firms constantly strive to adapt to evolving client needs and market trends. Fidelity Investments $FIS has now taken a significant step forward by unveiling two new ETF-only model portfolios. Designed to simplify the client portfolio construction process for asset managers, these portfolios aim to offer a cutting-edge solution to navigating the ever-growing universe of exchange-traded funds (ETFs).

What Are Fidelity’s Model Portfolios?  

Fidelity Investments has introduced two distinct ETF model portfolio lines tailored to meet diverse investment goals:  

1. Fidelity Target Allocation ETF Model  

   - Aimed at building a fundamental multi-asset class portfolio.  

   - Suited for a wide variety of client investment objectives.  

2. Fidelity Target Risk ETF Model  

   - Designed for risk management and mitigation.  

   - Incorporates liquid alternative investments to enhance diversification.  

These model portfolios include both active and passive ETFs and, notably, feature funds not only from Fidelity but also from other third-party providers, reinforcing Fidelity’s commitment to an open-architecture approach.  

Why Are Model Portfolios Gaining Popularity?  

The exponential growth in the number of ETFs has made fund selection increasingly complex for asset managers. Fidelity's model portfolios address this challenge by offering structured solutions with several key advantages:  

- Versatility: These portfolios cater to a diverse range of strategies and end-client profiles.  

- Open Architecture: With approximately 85% of all modern model portfolios now incorporating third-party funds, Fidelity aligns itself with this proven trend.  

- Resource Optimization: They save asset managers valuable time and effort in conducting ETF analysis.  

Data and Market Insights: A Look at the Model Portfolio Landscape  

Here are some compelling statistics that underpin the growing significance of ETFs and model portfolios:  

- As of the end of 2024, the U.S. market alone had nearly 4,000 distinct ETFs.  

- Fidelity reported that the number of ETFs included in its own customizable model portfolios had more than doubled over a two-year period.  

- Traditional products like fund-of-funds are increasingly being displaced by more agile and customizable solutions such as model portfolios.  

Fidelity’s Strategy for Staying Ahead  

Industry leaders like Fidelity are enhancing their offerings to meet advisors’ demands for streamlined solutions that can attract clients and expand their footprint. For example:  

- Matt Apkarian, Analyst at Cerulli Research, highlights the importance of creating innovative products that resonate with advisors and integrate seamlessly into their platforms.  

- At the same time, ETF issuers are growing increasingly aware of the need to design products that appeal to model developers, further fueling the evolution of the ETF market.  

Key Benefits of Fidelity’s Model Portfolios  

The following stand out as major advantages of Fidelity’s new offerings:  

- A diversified selection of assets across multiple strategies.  

- Simplified access to time-tested investment approaches.  

- An increased level of flexibility for building personalized client-focused solutions.  

Conclusion

Fidelity Investments’ launch of two ETF-focused model portfolios signals a broader industry trend toward simple, effective solutions for asset management professionals. With its focus on delivering choice, flexibility, and innovation, Fidelity remains at the forefront of adapting to the growing complexity of the ETF landscape. As the number of ETFs continues to rise, Fidelity’s products are poised to become an integral part of advisory strategies, undoubtedly securing their place in the growing model portfolio ecosystem.