Fidelity's Anti-Timing Tactics Frustrate Pension Clients

Some institutional pension plan sponsors like Coca-Cola have walked away from Fidelity Investments after the mutual fund giant implemented stringent short-term trading penalties aimed at deterring market timers, The Boston Globe reports. Vanguard has also blocked access to Fidelity funds offered in some of its retirement plans because of the redemption fees.

Fidelity's new rules have angered some investors who say that measures blocking portfolio rebalancing and withdrawing hardship loans have gone further than necessary to combat market timing.

At least 130 of Fidelity's 350 funds include a range of penalties up to 2% for redeeming assets within 30 to 90 days. Some experts have accused the firm of trying too hard to remain above the fray of far-reaching market timing scandals that have rocked a number of its competitors.

In 2004, Fidelity angered recordkeeping firms by insisting on more detailed records of trading activities, including short-term mutual fund exchanges. Fidelity acquiesced to the recordkeepers by extending a Dec. 31, 2004 deadline to implement new account monitoring systems to March 31.