Fidelity Investments outlined plans to launch no-fee index funds, hurting the shares of rivals including BlackRock Inc as investors worried about lower profits. The move marked the latest round of price cutting in the asset management industry, which has benefited from rising markets and steady inflows of investor cash to passively managed products.
"This news has likely led to the significant selling-off of asset manager stocks today with many of the stocks we track down (3 percent to 5 percent) versus flat for the S&P 500 index," Wells Fargo analyst Christopher Harris said in a research note. "We wouldn't think the Fidelity funds in and of themselves would lead to much change with respect to asset flows, but investors are likely concerned about the follow-on effects," Harris said.
A BlackRock spokeswoman said via e-mail that Fidelity has also expanded to 240 from 70 the number of BlackRock's iShares exchange-traded funds available commission-free on Fidelity's platform. "This, and the other actions Fidelity has taken, mean that it will be even easier for investors to access iShares ETFs," she said via e-mail.
Closely-held Fidelity of Boston said the Zero Total Market Index Fund and the Zero International Index Fund will be available to investors on Friday. "Investors will pay a 0.00 percent fee, regardless of how much they invest in either fund, while gaining exposure to nearly the entire global stock market," Fidelity said. Fidelity also outlined other changes including requiring no minimum investment to open a retail brokerage account, and said it will cut prices on existing mutual funds.
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