Fidelity Slashes Spartan Fund Costs

October 17, 2005 ( - In a move that may spark a renewed price war with arch-rival The Vanguard Group, Fidelity Investments announced Monday that it has cut fees on some of its mutual funds that track indexes.

Fidelity news release said it has created “Fidelity Advantage Class” shares for its Spartan equity index funds which it said will slash 30% in fees for eligible investors. For employer-sponsored retirement plans, a $100 million minimum investment in the fund – at the plan sponsor level – is required for employees to be eligible to invest in the Fidelity Advantage Class shares.

The reduction – the second in the Spartan funds this year (See   Fidelity Lowers Expenses for Five Funds ) – poses a threat to Vanguard, which has long sold itself as the pioneer of indexing that runs its funds at cost. Since August 2004, Spartan 500 Index Fund, Spartan US Equity Index Fund, Spartan Total Market Index Fund, Spartan Extended Market Index Fund, and Spartan International Index Fund have been priced with expense ratios of 10 basis points, or 0.10%.

As of Monday, qualified shareholders of the affected funds will be eligible to invest in Fidelity Advantage Class shares, which – at seven basis points or 0.07% – carry a 30% lower expense ratio.    

The new Fidelity Advantage Class and Investor Class shares expense ratios are contractually bound and may not be raised without a vote of the funds’ shareholders, Fidelity said.

Fidelity offers investors a total of nine index funds with more than $51 billion in assets as of September 30, 2005.