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Fidelity Drops Some Upfront Fees

The mutual fund giant says it has eliminated the 3% 'load' on some of its largest portfolios in an effort to boost sales.

June 24, 2003|From Bloomberg News and Times Staff Reports

Fidelity Investments, the largest U.S. mutual fund company, said Monday that it eliminated a 3% upfront fee on some of its largest stock funds in a move to boost sales.

Boston-based Fidelity dropped the sales fee, or "load," on the Low Priced Stock fund, which has $17 billion in assets; and on the $692-million Contrafund II. It also canceled plans to reinstate a 3% fee on the $30-billion Contrafund; that fund had waived the fee starting Feb. 25.

The company also dropped the 3% fee on its flagship portfolio, the $61-billion Magellan fund, and on the $3-billion New Millennium fund. Those funds have been closed to new investors and will remain closed, but investors who already own the shares and want to buy more now won't be charged the sales fee, Fidelity said.

The company has been lifting sales charges and introducing new funds this year to reverse two years of redemptions from stock funds. The market's spring rally has reignited some investors' interest in equity funds, and Fidelity sells most of its funds directly to investors, unlike some other fund companies that make most of their sales through financial advisors.

"They've been losing out in the directly sold fund market because of the handicap of the load," said Burton Greenwald, a fund consultant in Philadelphia. "This makes sense."

The three-year bear market has trimmed Fidelity's assets to $869 billion, down 15% since the market peak in March 2000.

The change will mean that all of Fidelity's diversified stock funds have gone back to being no-load for retail investors buying direct.

The move also comes as Congress and the Securities and Exchange Commission are reviewing fees and expenses in the fund industry. A report by the General Accounting Office last week said funds should be required to disclose more to investors about the fees they pay.

Fidelity's 41 sector stock funds, such as the $435-million Fidelity Select Defense and Aerospace fund, still will charge the 3% upfront sales fee. Fidelity and other fund companies historically have used such fees on industry-specific funds to deter short-term traders who try to make fast profits on sector rallies.

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