AriI. Weinberg

After years of ignoring one of the hottest investment options, Fidelity Investments appears to be planning a push into exchange-traded funds.

The fund giant recently filed an application with the Securities and Exchange Commission to offer a broad swath of index-based exchange-traded funds. The filing, if approved, would allow Fidelity to offer almost every type of index ETF available, including international funds and even long/short ETFs that mimic sophisticated hedge-fund strategies, said an ETF specialist and partner at law firm Katten Muchin Rosenmann LLP.

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It’s an extensive filing, said an ETF consultant and CEO of Magoon Capital, an investment firm. It shows that they are taking a longer-term view and want to be in this business.

A Fidelity spokesman declined to provide more details on the firm’s ETF strategy, saying only that it’s always looking for new ways to provide clients with products and services they need and want.

If the company moves forward, it would be jumping into a space that has become hugely popular. ETFs track baskets of securities like mutual funds but trade like stocks, and a growing number of financial advisers are building portfolios using ETFs alongside or instead of traditional index funds.

Investors would be able to buy the ETFs through their brokerage accounts and even 401(k) plans or IRAs, regardless of their affiliation with Fidelity.

To compete with established players, analysts say Fidelity would likely offer lower-cost ETFs and index funds. But investors in Fidelity-administered 401(k) plans may see little change in costs, given that most already have access to cheap institutional-class funds with expense ratios often lower than the cheapest ETFs. A large new entrant into the ETF business, however, could potentially help drive costs down across the board.

That said, analysts point out that Fidelity is entering the ETF game both late and at a time when some say there are already too many options for investors. From January through the fall, the ETF industry unveiled 287 new funds—a rate of nearly one a day. And yet, of the more than 1,400 exchange-traded products in the U.S. 80% of the assets are controlled by about 100 funds, according to IndexUniverse, a research firm.

Currently, the U.S. ETF business is dominated by three big players— BLK, -0.26% ‘s iShares unit, STT, -0.35% State Street Global Advisors and Vanguard Group Inc. which together manage 82% of the more than $1 trillion in U.S.-listed exchange-traded assets at the end of the third quarter, according to the BlackRock Investment Institute.

A big part of ETFs’ appeal for regular investors is their low fees, financial advisers say. The average annual expense ratio for an actively managed large-cap stock mutual fund is 1.28%, compared with 0.71% for a large-cap stock index fund and just 0.33% for a large-cap index ETF, according to Morningstar.

Fidelity has made few inroads into the ETF business thus far. Known primarily for actively managed mutual funds, the company in 2003 launched the ONEQ ETF to compete against PowerShares’s QQQ, which tracks the Nasdaq-100 Index. But it was no contest, analysts say: PowerShares’ product holds $24.8 billion in assets, compared with just $149 million for Fidelity’s offering, according to fund researcher Morningstar Inc.

But Fidelity’s filing would allow it to follow a path similar to SCHW, -2.29% ‘s, say analysts, since both firms have large retail and adviser brokerage platforms. Schwab in November 2009 launched its ETF effort by waiving trading commissions on the first offerings from its family of in-house ETFs, which now total 15. Schwab has since gained nearly $5 billion in assets.