Recovering Fido’s money wins again

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Earlier this year, Alphaville wrote about how State Street’s $380 billion flagship (and pioneer of the sector) ETFs could be surpassed in activity from competitors from BlackRock and Vanguard. But he’s already been to a different kind of rival.

Watch this:

Strictly speaking, the Fidelity 500 index fund it is not an ETF like State Street Global Advisors SPDR S&P 500 ETF fund (or of BlackRock iShares Core S&P 500 ETFs or Vanguard S&P 500 ETFs).

SDPR – often known just as “Spider” – is also comfortably the most traded stock in the world and has a huge derivatives network based on it. So this isn’t really an apples to apples comparison, at least when it comes to the value of the franchise.

But it’s quite remarkable how quickly Fidelity’s S&P 500 index fund has grown recently. A decade ago it managed just $57 billion and five years ago it was $146 billion. It was managing $388.6 billion at the end of April, compared to $385.8 billion in SPDR.

(NB, the Vanguard ETF is just one share class of its Vanguard 500 index fund, which together is easily the largest of them all, with $821 billion in assets under management. No one will ever catch up.)

There’s no real secret as to why Fidelity has now leapfrogged its Boston rival’s S&P 500 main offering: cost – charging just 2 basis points compared to BlackRock and Vanguard’s 3 bps and SPDR’s 9.5 bps – get married to Fido’s extensive distribution.

It’s often easy to think of Fidelity as just an asset manager. It is their oldest and largest business, after all. But the reality is that it is a multi-faceted, sprawling machine designed to constantly collect money from people, businesses and organizations in the world’s largest economy and funnel it into investment products.

Fidelity latest report it said it has 38 million individual retail accounts, 42 million workplace accounts and $11.1 trillion in client assets across its various platforms, including $4.2 trillion in actual Fidelity funds. Even last year, when the markets were pretty risky across the board, Fidelity absorbed another one $466 billion in net inflows.

The fact that the only fund larger than Fidelity is now an index fund will tickle anyone who remembers how fiercely the company criticized passive investing in its early days and how reluctantly it eventually began to dabble in them (initially under a separate brand to avoid tarnishing the Fidelity brand with tacky passive funds).

The artist Previously known as the Spartan 500 index fund is now nearly four times the size of Willian Danoff’s Contrafund and more than fifteen times the size of the once-imperious Magellan Fund. What would Ned Johnson think?

Further reading:

— Geode, Fidelity’s index fund firm, hits $1 trillion in assets
— Fido (hearts) ETF
— How Fidelity’s Ned Johnson Defied the Boss’s Child Curse