Fidelity Ramps Up Fee War With Vanguard

The $2.7 trillion asset manager announced price cuts for a suite of target-date products in an ongoing race to offer the cheapest funds.

Abigail Johnson, chairman and chief executive officer of Fidelity Investments. (Andrew Harrer/Bloomberg)

Abigail Johnson, chairman and chief executive officer of Fidelity Investments.

(Andrew Harrer/Bloomberg)

Fidelity Investments on Wednesday announced a 14 percent fee reduction to a collection of passive target-date funds.

The firm said that on June 1 net expenses for the Fidelity Freedom Index Funds dropped to 0.12 percent, from 0.14 percent, for the entry-level investor share class. The institutional premium share class for these multi-asset funds, designed to become more conservative as investors near a targeted retirement date, will remain at an “industry leading” 0.8 percent, according to the statement.

Fidelity said that the price change means that 21 of its 22 Freedom Index Funds are now cheaper than comparable Vanguard Group products, saving current shareholders an expected $3.2 million annually. The 22nd fund, the Fidelity Freedom Index Income Fund, now costs the same as its Vanguard counterpart, according to the statement.

“At Fidelity, we have a long history of providing investors with a wide array of high-quality products at a great value to help them meet their investment goals,” said Eric Kaplan, Fidelity’s head of target-date products, in a statement. “These target-date index fund expense reductions build on that legacy.”

[II Deep Dive: Fidelity’s Race to Manage Funds for Free]


In addition to the cost reduction for the target-date index funds, Fidelity also announced a price drop for the entry-level share classes of the Fidelity Institutional Asset Management Index Target Date Commingled Pools.

Investors in these share classes are now eligible for a net expense of 0.12 percent, a decrease from 0.14 percent. Prices for all other share classes were not changed, according to the statement.

Wednesday’s announcement marks Fidelity’s latest effort to position itself as the cheapest index fund provider in the market. The asset manager previously reduced fees for several of its other passive products, and last year introduced what it described as the first zero-fee index funds, including total market, international, large-cap, and extended market funds.

The first two zero-fee funds — Fidelity ZERO Total Market Index and Fidelity ZERO International Index — gained $1 billion in assets in a little more than one month.