Fidelity Monday announced two new share classes of several state-specific money market funds, aiming to attract tax-savvy investors.
Institutional and high-net-worth investors can buy the funds either directly or through intermediaries. Retail shareholders will also pay lower fees for the tax-free Fidelity California, Massachusetts, New Jersey and New York funds.
“These new share classes will provide additional investment choices for the fast-growing number of investors affect by the [alternative minimum tax],” said John Sweeny, senior vice president of Fidelity Personal Investments. When the AMT was first introduced in 1970, it was lauded by lawmakers as a way of requiring individuals who essentially evaded federal income taxes through complex deductions, to contribute. The system, which has its own rules, applied to roughly 4% of the population in 2006, but as soon as 2010, nearly 33% of Americans could be subject to the tax, according to Urban-Brookings Tax Policy Center.
“We have seen an increased interest in state-specific municipal money market options,” said Sweeny. The new share classes, he said, will provide cost-efficient investment tools, he said.
The funds require a $1 million initial investment. The cost of the Institutional Class funds will be 20 basis points, or 0.20%, while Service Class shares will be capped at 45 basis points, or 0.45%. Costs for the retail class, which requires an initial investment of $25,000 or greater, are capped at 0.30% or 30 basis points. Previously, the Massachusetts and New York funds were 40 basis points, while the California and New Jersey funds carried a 0.35% expense ratio.