Fidelity Investments is upping its game in the battle to win over investors who increasingly favor passive funds. The firm will reduce total expenses on 14 of its 20 index mutual funds as of Tuesday, a move it claims will make its stock and bond index funds and sector ETFs cheaper than some of their Vanguard counterparts.
The average expenses on Fidelity’s fund lineup is set to drop by close to 10 basis points (by 9.9 basis points, or 0.099%) from 11 basis points today. The expense drop could save current shareholders up to $18 million annually, the privately held firm says.
According to Vanguard’s website, the Vanguard 500 Index Fund Investor Shares have an expense ratio of 00.14%. The fund’s Admiral Shares, though, have an expense ratio of just 0.04%, as do shares of the Vanguard S&P 500 ETF.
“For index investors focused on cost, there’s no need to look further than Fidelity. Already one of the industry’s lowest cost index fund providers, we now offer an even better value,” said Colby Penzone, senior vice president for Fidelity’s Investment Product Group, in a statement.
The news comes several days after Fidelity announced plans to offer advisory firms using its Clearing & Custody Solutions more loans for wealth-management clients via partnerships with Goldman Sachs and U.S. Bank. The deal with Goldman Sachs Private Bank Select, for instance, means advisors can offer eligible clients securities-based loans of between $75,000 and $25 million.
The products Fidelity is dropping fees on include the Fidelity 500 Index Fund, Fidelity Total Market Index and Fidelity Extended Market Index Fund.