Fidelity AUM Nears $8T Riding ‘Perfect Storm’ of Retail Investors

Fidelity is riding the retail investing wave.

In a sign of just how active investors have become, privately owned Fidelity Investments announced an average of 5.7 million daily trades on its platform during the second quarter, a 31% increase from a year earlier. The surge helped push Fidelity’s assets under management to nearly $8 trillion, up 23% year over year. But, it didn’t stop there. This year, Fidelity also introduced ETF share classes for existing municipal bond, short-term bond and real estate mutual funds, and bulked up its lower-cost actively managed ETFs, with expense ratios as low as 18 basis points. “We evolved our ETF offerings, enhanced our trading tools and continued to grow our unified managed household offering,” Fidelity CEO Abigail Johnson said in a statement.

If You Build It, They Will Come

Rising markets have certainly played a major role in earnings beats for the big brokerages. But Fidelity has also spent the past several months making alternatives a larger part of its business. In March, it fully launched model portfolios with built-in private market exposure while expanding its alternatives education program for advisors.

Fidelity isn’t alone in its expansion:

• This year, Charles Schwab completed its acquisition of Forge Global, expanding its private market capabilities, and rolled out spot bitcoin and ether ETF trading for retail clients. The discount brokerage reported record client assets of $13.1 trillion in the second quarter, up 22% from the same time last year.
• Robinhood, meanwhile, launched its advisors network and expanded the capabilities of Cortex, its AI-powered investment assistant. The online brokerage reported transaction-based revenue climbed 44% year over year, driven largely by options trading and event contracts.

“We have increasingly easy access to trading and have seen a new generation of retail traders join the market en masse, continuing the trend from the meme-stock craze earlier this decade,” said Jack Miller, head of global execution services with Baird. “This is before factoring in any ancillary effects from increased participation in sports betting and prediction markets. It’s a perfect storm for self-directed retail investing activity at a cultural level.”