Fidelity Hangs Tough

January 01, 2000

Fidelity Investments will keep price ceilings intact on four of its stock index mutual funds in a bid to stay competitive in the low-cost index fund market.

Two of the funds, the Spartan Extended Market Index fund and the Spartan Total Market Index fund, capped expenses at 0.25%, and the Spartan International Index fund capped its expense ratio at 0.35% at their inception in 1997. A fourth fund launched in 1990, the Spartan Market Index fund, also had its 0.19% expense ratio capped in 1997.

Fidelity initially instituted the expense caps to keep its index funds among the lowest priced in the industry, said Jessica Catino, a Fidelity spokeswoman. At the time, Fidelity said it would reevaluate those fees by the end of 1999.

"We recognized then and now that investors are making choices among funds by looking closely at fund expenses, especially with index funds," Catino said.

If Fidelity were to raise fees on its index funds it would essentially take it out of the competitive arena with indexing giant Vanguard Group, according to Jim Lowell, editor of Fidelity Investor newsletter.

The $91 billion Vanguard 500 Index fund, which tracks the S&P500, charges total annual expenses of 0.18%.

"It would be impossible for Fidelity to compete in the index landscape if their fees weren't compatible," said Lowell.

 

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