No doubt, mentioning mutual funds without mentioning Fidelity Investments is like discussing great gorilla movies without mentioning King Kong.

The Boston-based fund behemoth, with $1.9 trillion in assets under management, has largely made its mark in the actively managed side of the investment product aisle.

But on October 24, Fidelity shifted its investment model (somewhat, given the army of funds it has under its umbrella) toward a more passive investment approach.

That’s the date Fidelity announced 10 new “passively-managed” exchange-traded funds (ETFs), the first-ever passive ETFs rolled out under the Fidelity banner.

But it’s really on the marketing side, and not the investment management side, where Fidelity wants to make a dent in the $1.3 trillion US ETF market, according to figures from the Washington, DC-based Investment Company Institute.

Here’s a snapshot the US ETF Market, from the Investment Company Institute (as of December 31, 2012):

Total size of US ETF market: $1.3 trillion

Number of Americans who own ETFs: 3.4 million, or 3 percent of US households

Number of US-based ETF providers: 36

Growth rate for ETFs: From year-end 2002 through November 2012, ETFs issued $1,036 billion in net new shares. Most of the activity was targeted toward broad-based domestic equity ETFs.

Leading ETF sectors: Large-cap domestic equity ETFs are the most popular investor category, comprising 21 percent (or $271 billion) of all ETF assets (as of November, 2012). Emerging markets equity ETFs ranked second, comprising 12 percent ($152 billion) of ETF assets.

Fidelity is out to muscle into once-largely uncharted territory with what it calls the  “lowest-cost passively managed sector ETFs in the industry, with total expense ratios of just 0.12 percent,” the company said in a statement.

That’s 80 percent below the average for passively-managed ETFs, Fidelity adds. The claim is a generally true statement, as the average ETF offers an expense ratio of 0.44 percent (meaning the ETF will charge you $4.40 in annual fees for every $1,000 you invest). And, the average traditional index fund stands at 0.74 percent, giving Fidelity an even stronger entry-level pricing point story with it 10 new ETFS.

In addition, Fidelity is tossing in one more treat to sweeten the deal: Both investors and investment advisors can buy any one of the new ETFs commission-free, as long as they make the purchase online, and through one of the mutual fund giant’s own brokerage markets (a move right out of the user-friendly Charles Schwab marketing playbook).

Fidelity managers say the rollout is all due to investor demand.

“Since the financial crisis five years ago, investors and advisors have told us that they are looking for additional ways to diversify their portfolios and get exposure to specific industries outside of the typical cap-weighted or style specific options such as large or small cap, or growth and value,” offers Anthony Rochte, president of SelectCo, Fidelity’s sector investing arm. “Our new passive sector ETFs can provide for that diversification, serving as building blocks to help investors and advisors find new ways of generating alpha through asset allocation and better manage portfolio risk.”

That’s certainly one explanation for the new ETF offerings, but that 0.12 percent expense fee provides another, more dollar-driven explanation, to wit: the firm thinks it can undercut the competition in the ETF market and grab a huge slice of that $1.3 trillion in ETF assets.

That’s great news for investors, as Fidelity is looking to declare war on its main fund rivals, who will have to ratchet down their own fund fees to stay competitive with the new Fidelity ETFs. As any economist (and any mom who buys peanut butter at the grocery store) will tell you, once a major consumer brand brings its prices down, it’s very difficult to bring them back up again.

Consequently, a drive to the bottom in ETF fees is a major win for fund consumers, even though the 10 new Fidelity funds offer very little in terms of creative portfolio plays for investors (virtually all of the new funds overlap their holdings with other consumer discretionary ETFs; the difference really is in the fund fee).

So if you want to get in on the ground floor, fee-wise at least, of a broad-based equity ETF, you won’t find a better deal than the new Fidelity ETFs.

That is, for now—or until the rest of the fund industry shakes its fists towards Boston and cuts fees on their own ETFs.

That will likely happen sooner rather than later.

Fidelity’s New ETF Line-up

Here’s a look at the new ETF line-up coming out of Boston, including the index each fund is benchmarked against:

ETF – Fidelity MSCI Industrials Index ETF (NYSE: FIDU)
Index – MSCI USA IMI Industrials Index

ETF – Fidelity MSCI Health Care Index ETF (NYSE: FHLC)
Index – MSCI USA IMI Health Care Index

ETF – Fidelity MSCI Financials Index ETF (NYSE: FNCL)
Index – MSCI USA IMI Financials Index

ETF – Fidelity MSCI Information Technology Index ETF (NYSE: FTEC)
Index – MSCI USA IMI Information Technology Index

ETF- Fidelity MSCI Telecommunication Services Index ETF (NYSE: FCOM)
Index – MSCI USA IMI Telecommunication Services 25/50 Index

ETF – Fidelity MSCI Consumer Discretionary Index ETF (NYSE: FDIS)
Index – MSCI USA IMI Consumer Discretionary Index

ETF – Fidelity MSCI Consumer Staples Index ETF (NYSE: FSTA)
Index – MSCI USA IMI Consumer Staples Index

ETF – Fidelity MSCI Energy Index ETF (NYSE: FENY)
Index – MSCI USA IMI Energy Index

ETF – Fidelity MSCI Materials Index ETF (NYSE: FMAT)
Index – MSCI USA IMI Materials Index

ETF – Fidelity MSCI Utilities Index ETF (NYSE: FUTY)
Index- MSCI USA IMI Utilities Index
        
Brian O’Connell is an investment analyst at Investing Daily. He has appeared as an expert financial commentator on CNN, NPR, Fox News, Bloomberg, CNBC, C-Span, CBS Radio, and many other media broadcast outlets.