Fidelity Investments has lowered the price of 14 of its US stock and bond funds, firing the
latest salvo in the price war between some of the world's largest index-tracking managers.
The Boston-based firm, which manages $2.3tn, said it will reduce total expenses on the funds immediately. It said the move meant that "100% of its stock and bond index mutual funds and sector ETFs would have total net expenses lower than their comparable Vanguard fund".
Vanguard, a rival US asset management firm with $4tn in assets under management, is known for its low-cost, index-tracking funds, which aim to mirror the returns of an index rather than outperform it like an active manager.
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Vanguard's founder and former chairman Jack Bogle was the creator of the index fund and for many years his firm dominated what is known as the passive funds market.
But in the US, firms including Charles Schwab and TD Ameritrade, as well as Fidelity, have been battling for market share by cutting trading commission and fees.
A spokesman for Vanguard said: "Low costs are in our DNA, not our marketing strategies. While competitors have sought to essentially match us on index and ETF expense ratios, Vanguard has maintained its across-the-board, low-cost leadership advantage."
Vanguard has also taken its fight to Europe, and in June it stepped up the competition by launching a UK retail fund platform.
The price wars are partly a result of a shift towards index investments, as investors look for lower cost alternatives to actively-managed funds, which some believe do not deliver good enough performance to justify their higher fees.
Fidelity's price cuts mean that the average expenses across its stock and bond index funds will decrease to 9.9 basis points, down from 11bp.
Robin Powell, an ambassador for the Transparency Task Force, which campaigns for more transparency in the investment industry, welcomed the cost cuts, but added: "It’s a shame that most of the reductions we’re seeing are on passively managed funds, which were already very much cheaper than active funds. This simply makes the price difference between active and passive even bigger.
“Including transaction costs, it’s not unusual for active investors to be paying 10 or 15 times more to invest than passive investors. Compounded over, say, 20 or 30 years or more, that translates into a whopping sum of money."
