Vanguard isnt taking Fidelitys cuts on five of its equity index funds lightly. The Valley Forge, Pa.-based fund giant posted a message on its Web site accusing Fidelity misleading investors by disguising temporary price rollbacks on the five funds as permanent cost reductions. Fidelity recently slashed prices on five index funds in its Spartan series in an attempt to chisel away at Vanguard's index fund territory and compete with low-cost exchange-traded funds. Without mentioning Fidelity by name, Vanguard posted a message on its Web site warning investors to note the difference between "waiving fees" and permanently lowering expenses. "Reduced fees sound good, but check the fine print," Vanguard advises. The memo cautions investors to keep an eye out for the possibility of a fund temporarily waiving fees to attract new customers and then raising expenses at a later date. Vanguard, which stakes its reputation of providing inexpensive index funds, potentially has a vested interest in rebuffing Fidelity to defend its turf. "It's important to recognize the difference between a fee reduction and a fee waiver," the memo says. "Investors should check carefully to see whether the expense reduction they read or hear about are based on fee waivers, through which a fund company can reimburse some or all of the funds' expenses."
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