Fidelity Investments is amping up the low-cost nature of its funds, filing with the Securities and Exchange Commission for a new international mutual fund that has no fees associated with it. First spotted by ThinkAdvisors, the Flex International Index Fund, which was created to track foreign stocks, will be free to investors in certain Fidelity Investments fee-based accounts, including managed accounts, retirement plans, plan sponsors and/or plan participants in which customers already pay a wrap fee that covers the advisory and administrative services costs.
In the SEC filing, Fidelity said that the new fund will invest at least 80% of assets in stocks that are included in the MSCI All Country World Index, ex USA Index and in depository receipts of stocks included in the index. The Boston-based fund company noted that the MSCI All Country World Index and the ex USA Index are both designed to measure equity market performance for developing and emerging markets excluding the U.S.
[Ally Invest offers powerful charting tools and $4.95 trades. Read Investopedia's Ally Invest review to learn more about this low-cost broker.]
On top of the new no-fee international fund, ThinkAdvisor reported that Fidelity is reducing the fees on three actively managed bond exchange-traded funds (ETFs) – the Fidelity Corporate Bond ETF (FCOR), Fidelity Limited Term Bond ETF (FLTB) and Fidelity Total Bond ETF (FBND) – to 36 basis point from 45 basis points. ThinkAdvisor noted that the three ETFs were brought to market in October 2014 and marked the fund company's first actively managed ETFs.
The move on the part of Fidelity to roll out a new international fund with zero fees and to reduce the fees associated with the three bond ETFs comes as the movement to low-cost investing continues unabated. With brokerages and fund companies reducing fees and offering investment products with low to no expenses, Fidelity has no choice but to follow suit. According to ThinkAdvisor, back in July, Fidelity said that it would lower the fees on 14 of its 20 index mutual funds, claiming at the time that this would result in some of its index funds being cheaper than those of Vanguard, the king of low-cost investing. In February 2017, Fidelity lowered trading commissions to $3 from $4.95 per trade, noted ThinkAdvisor.
Fidelity's fee reductions also come as actively managed mutual funds are falling out of favor with investors. In 2017, Fidelity reported that it had $47 billion in net withdrawals from its actively managed stock funds. To counter that, the company has been diversifying beyond active funds – including offering ETFs and managed accounts – and those efforts appear to be paying off. Fidelity ended 2017 with assets of $124 billion in products outside of mutual funds, which was up from just $18 billion in 2009. The company said that those businesses not only offset outflows from actively managed funds but also demonstrate that investors still want active management, just in different ways.