Fidelity Investments has expanded its fixed income ETF lineup for investors with the addition of two muni bond ETFs.
Fidelity launched the Fidelity Municipal Bond Opportunities ETF (FMUB) and the Fidelity Systematic Municipal Bond Index ETF (FMUN) on Nasdaq on April 7. Additionally, the two ETFs are available commission-free for individual investors and financial advisors through Fidelity’s online brokerage platforms.
“The tax free muni space with some yield is clearly an asset class that’s in high demand,” Greg Friedman, Head of ETF Management and Strategy at Fidelity told VettaFi. “We’re excited about these two products… they solve our clients’ demand for tax-exempt income and also fit as a puzzle piece that we’re missing for those that want to create models off our products.”
The number of portfolios that utilize fixed income ETFs increased by 6% in the past year, according to Fidelity’s Portfolio Construction Insights, highlighting growing demand in the fixed income ETF market.
The new ETFs, launched through mutual fund to ETF conversions, will generally maintain the same investment strategies as the previous mutual funds. FMUB and FMUN are competitively priced, charging 0.30% and 0.05%, respectively.
The conversion of the strategies into ETF wrappers provide multiple benefits for investors. These include lower net expenses, additional trading flexibility, and increased portfolio holdings transparency, according to Friedman.
“It allows it to be traded on a secondary market. It becomes platform agnostic, where it’s not just traded on Fidelity’s platform,” Friedman added. “That allows investors across the industry to get easy access in a way that they’re used to, and it’s consistent with the growth of active ETFs and ETFs in general.”
Under the Hood of the 2 New Muni Bond ETFs
FMUN aims to offer a high current yield exempt from federal income tax by investing in muni securities whose interest is exempt from federal income tax. The ETF will seek to replicate the performance of the Fidelity Systematic U.S. Municipal Bond Index by normally investing 80% of its assets in securities included in the Index.
FMUB also seeks to provide high current yield exempt from federal income tax, but growth of capital may be considered. Additionally, the ETF will invest in muni securities with interest exempt from federal income tax. The majority of holdings are investment-grade; however, it may invest up to 30% of its assets in lower-quality debt securities.
“You’ve got one product that is smart beta-like, where it uses a proprietary index, which can have some value. It’s more concentrated, more focused on risk-return as well as liquidity,” Friedman said. “[Investors are offered] a more traditional Fidelity fundamental bonds-type of investing in the other product. That has some exposure to lower-rated issuers that increase the yield.”
“So both of these can be used by all types of investors that need muni exposure,” Friedman added.
The addition of FMUB and FMUN adds roughly $229 million in assets under management to Fidelity’s fixed income ETF lineup. Furthermore, the firm’s full ETF/ETP line-up comprises 78 strategies with $109 billion in assets as of March 31, 2025.
For more news, information, and analysis, visit the ETF Investing Channel.
Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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