Fidelity Trims Fees on Target Date Index Funds, Undercutting Vanguard

Fidelity says the fee cuts will save current Fidelity Freedom Index Fund shareholders approximately $3.2 million annually, based on fund assets as of April 30.

(Related: Fidelity Trims Index Fund Fees, Challenging Vanguard)

Fidelity also cut the expense ratio for the investor share class of some target date funds that serve workplace retirement plans. The fee for Fidelity Institutional Asset Management (FIAM) Index Target Date commingled pools with assets of $100 million or less is now 12 basis points, down from 14. The expense ratios for larger pools remain unchanged and range between 5 and 8 basis points, and the fee for the Institutional Premium class of Fidelity Freedom Index Funds is also unchanged, at 8 basis points.

(Related: Low Fees Reshape Target Date Fund Market: Morningstar)

Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, says Fidelity's latest fee cuts are a response to growing demand from investors who "continue to gravitate toward cheaper index-based strategies" that can help the firm attract more assets. The move also "continues a recent trend for Fidelity for aggressively pricing their index-based offerings, rather than solely encouraging investors to choose their actively managed products," says Rosenbluth.