On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, discussed the Fidelity Blue Chip Growth ETF (FBCG B-) with Chuck Jaffe of Money Life. The pair discussed several topics related to the ETF, in order to give investors a deeper understanding of it.Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week!
Yes, this is the ETF of the Week, where we get the latest take from Todd Rosenbluth, Head of Research at VettaFi. And if you go to ETFDb.com, VettaFi’s sister site, you can dig into all the tools you’re going to need to be a savvier, smarter ETF investor, and to get more details on the new, newsworthy, trending, and timely ETFs that we talk about here.
Todd Rosenbluth, great to chat with you again!
Todd Rosenbluth: It’s great to be back, Chuck.
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The Fidelity Blue Chip Growth ETF, FBCG.
Chuck Jaffe: FBCG, the Fidelity Blue Chip Growth ETF. And it’s important that we make, in this case, the word ETF part of the name because there is the Fidelity Blue Chip Fund that is ticker symbol FBGRX. They are not the same thing. It’s not the same portfolio in a different wrapper.
This fund is about six or seven years old at this point. Why this fund as ETF of the Week now?
Todd Rosenbluth: You’re right. So it caught my eye that this fund has gathered — this ETF, FBCG, has gathered a billion dollars of net new money this year. It’s now a $7 billion ETF. You’re right, it’s roughly 6 or 7 years old.
What we’ve seen as we made our way through earnings season is that there’s been disparity in the performance of the former Mag Seven, those mega-cap growth stocks. And I think people are leaning into active management that helps them to be able to differentiate between the two.
Chuck Jaffe: But let’s start on this with the definition of blue chip, because it used to be a meaningful term. Like when the Fidelity Blue Chip Growth traditional mutual fund started, you were saying something when you said, “I’m buying blue chip stocks.” And it basically meant, “I’m buying companies that are big American, you know, American dream builders with big balance sheets and the rest.” But that’s not a term that most people use anymore.
So one, does this ETF hold what we think it does? Is this some new measure of blue chip in terms of what qualifies?
Todd Rosenbluth: So blue chip, or blue chip growth, has been known as a strategy for Fidelity for years. We talked about there being a mutual fund that has a very long track record that the ETF is used as a base for. So what has been inside it has evolved. But when I look inside the portfolio, I see a lot of mega-cap growth stocks. But what I see is that there are the benefits of active management.
I would think many people would agree companies like Apple, Alphabet, and Eli Lilly, those are high-quality growth stocks. But blue chip doesn’t necessarily mean dividend-paying. Meta is in here; it pays a small dividend I think. Nvidia is in here. Amazon is in here; I don’t believe Amazon pays a dividend.
So, the devil is in the details. It’s important to look at this. I think of this as an actively managed large-cap growth fund — and I use the word fund because exchange-traded fund, but this is an active large-cap growth ETF. And it matters who’s running the fund, how long they’ve been running the fund, and how they’re doing with it. And all things combined, Fidelity is doing quite well.
Chuck Jaffe: I’m not sure this question has ever come up, but since we’re talking about how FBCG, Fidelity Blue Chip Growth, the ETF, is the ETF of the Week that is based, but not the same as, their traditional fund. For years, Fidelity resisted opening ETFs. And the reason it resisted was it said, “We don’t want to have to disclose our portfolio every day. You know, we’re actively managed, we’ve got our secret sauce, we don’t want to have to disclose the recipe all the time.”
Then, of course, there came a point where ETFs were taking over the fund world. Fidelity came along. But I’m curious: normally we’re talking about the cost advantages of an ETF and all the rest. Is there any disadvantage that Fidelity or any other fund company has actually seemed to experience when they said, “Yeah, we’re going to disclose our portfolio every day”?
Todd Rosenbluth: So, you’re calling out a good question with that, and I’m going to tweak or change my answer to it based on how you went with it. This is a semi-transparent ETF. This ETF from Fidelity is one of those handful of funds that they launched seven years ago. A couple of other firms, including T. Rowe Price, have launched semi-transparent ETFs. So the holdings that I’m referring to are as of the end of the quarter, I believe — end of June, the holdings are.
We’ve gone through an earnings season. It is possible that Nvidia is not the largest holding anymore, that Apple is not the second largest holding, because active management has played a role. So to protect the existing shareholders of the overall strategy, Fidelity is continuing to offer a semi-transparent ETF that has the same style as their semi-transparent mutual fund.
And since we talked again about the Fidelity Blue Chip Growth Fund, the mutual fund, that’s a $100 billion mutual fund strategy. So it makes sense to protect the shareholders. Fidelity has since launched a series of fully transparent active ETFs. They are not clones or analogs of the prior mutual fund strategies, and so they don’t have to protect the same shareholders. So I think it’s important to know a couple of things: One, the holdings that you look at — you or I or any of the listeners or viewers of this — will have a slight lag behind it. And you will have the same portfolio, even if it’s not a share class of that existing mutual fund.
Chuck Jaffe: When you take a look at the largest holdings here, I mean, most people, even if they don’t have a blue chip fund or “blue chip” in the name of their funds, have blue chip stocks because it’s almost impossible not to if you have any sort of large-cap growth, etc.
So is this, for you, an upgrade candidate? Like if you don’t like the fund you’ve got, you’re upgrading? Or is this a call in saying, “Tilt this way”? Or is it just, you know, maybe when you, in your large caps, have something that’s passive and something that’s active, and you’ll, you know, take advantage of both styles?
Todd Rosenbluth: So I think D, all of the above. I think you gave me three choices there! To me, this — so people are going to own and have exposure to many of the stocks that you would find in the top ten or top 15 holdings of this Fidelity ETF. Nvidia, Apple, Alphabet, Meta, Microsoft — those are all top holdings within this portfolio.
But what you’re getting here that is different than the S&P 500 Growth ETF or the Vanguard Growth ETF is you’re getting the benefits of active management. So not all stocks are equal, or not even based on the size of the company the way that it would be in an index-based product. You have a management team with a long track record of success that is sorting through those companies and choosing who they think are going to be the likely outperformers over the next couple of years. That’s the benefit of this.
So this ETF, FBCG, could pair well with an index-based product that has exposure to those companies, whether it was just broad market cap or it was growth. And there are also people who likely own the mutual fund version of this. And what you get with this ETF is the benefits of an ETF: the liquidity of an ETF and the tax efficiency of the ETF. So Fidelity Blue Chip Growth Fund, the mutual fund, has passed along capital gains to shareholders in the last couple of years. The ETF hasn’t. That’s a notable benefit.
Let me just get ahead of where you might be going: I am not suggesting that people sell their existing mutual fund shares to then buy the more tax-efficient ETF, because that would be a taxable event. You wouldn’t be able to swap into the ETF without having to pay taxes. But if you own the fund and you’re looking to add net new money to the strategy, the Fidelity Blue Chip Growth ETF could be a better way of doing so.
Chuck Jaffe: Yeah, and if you don’t own the fund, but you’re hearing and you check it out after we discuss it, you should understand that if you buy the classic fund, there are some embedded capital gains. When they someday realize those, there will be a tax event, which you wouldn’t have in the ETF.
I will say that ETF is also a little bit cheaper on the expense ratio — not a lot cheaper, but that’s another question here. Because with an expense ratio of just over 0.55%, it is a little pricey for a large-cap growth fund, isn’t it? A large-cap growth ETF, isn’t it?
Todd Rosenbluth: You’re right. So certainly more than an index-based product. And we in prior weeks talked about some more quantitatively derived actively managed strategies, and as such, the fees tend to be lower. So this is, relative to a mutual fund, cheaper; relative to some and perhaps many other active ETFs, you’re paying a premium.
What you’re paying for is hopefully the track record. And this fund has delivered over the time period, and the mutual fund strategy that predates it has significantly outperformed an index-based strategy. So to me, it’s worth taking a closer look at, keeping the fee as part of the overall thought process.
Chuck Jaffe: And that’s why FBCG, Fidelity Blue Chip Growth ETF, is the ETF of the Week. Todd, great stuff as always. Thanks for joining me.
Todd Rosenbluth: Thanks a lot, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yeah, I’m Chuck Jaffe. And if you want to learn more about my hour-long weekday show, check it out at MoneyLifeShow.com, or search for it wherever you find your favorite podcasts.
And if you want to search for great information on your favorite ETFs or the ones we talk about that might be your next favorite ETFs, go to ETFDb.com. That is a sister site to VettaFi, and it’s got all the tools you need to be a better investor in ETFs. They’re on X @ETFBb, and Todd Rosenbluth, their head of research, my guest, he’s on X, too — he’s @ToddRosenbluth.
The ETF of the Week is here for you every Thursday. Follow us on your favorite podcast app so that you don’t miss an episode. And we’ll introduce you to another great ETF next week. Until then, happy investing, everybody!
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Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
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