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Fidelity expands zero-fee lineup

Fidelity Investments said it will start two additional zero-expense-ratio mutual funds, stepping up its push to lure cost-conscious individual investors.

The Fidelity Zero Large Cap Index Fund and the Fidelity Zero Extended Market Index Fund will be available beginning Sept. 18, Boston-based Fidelity said in a statement Wednesday.

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Pedestrians pass a Fidelity Investments office in Boston, Massachusetts Tuesday, May 8, 2007. Until recently, LBO dealmakers led by Henry Kravis, David Bonderman and Leon Black paid scant attention to the interests of shareholders as they gorged on a record $864 billion of publicly traded companies in the past three years. Even Boston- based Fidelity, the largest U.S. mutual-fund company, with $1.4 trillion of assets, and Baltimore's T. Rowe Price Group Inc., which manages $350 billion for clients, were told to take it or leave it when presented with takeover offers. Now, the balance of power is beginning to shift as investors, tired of watching LBO firms make as much as eight times their money buying and selling public companies, are demanding more. Photographer: JB Reed/ Bloomberg News

The firm gathered about $1 billion since creating the industry’s first free index mutual funds in early August: the Fidelity Zero Total Market Index Fund (FZROX) and the Fidelity Zero International Index Fund (FZLIX). Fidelity’s initial salvo caught attention across the money management industry as companies compete for customers by slashing expenses.

“Fidelity is looking to improve its competitive positioning and marketing effort against other brokers including Schwab, TD Ameritrade, Vanguard and Bank of America with its zero index fund launch and improve its net new asset levels,” analysts at Credit Suisse led by Craig Siegenthaler wrote in a Sept. 4 note.

Fidelity has about $7.2 trillion under administration, including $2.6 trillion of managed assets. Its new large cap fund will track an index of large-capitalization companies, while the extended market fund will track an index of small and mid-size firms.