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Thursday, May 13, 2010

Fidelity Turns the Spotlight from People to Products

Reported by Armie Margaret Lee

Fidelity is in the news for the second time this week, but this time the subject is its products, not people. The Boston Behemoth unveiled a new mutual fund, the Corporate Bond Fund, and rolled out Advisor share classes for the Real Estate Income Fund.

The Corporate Bond Fund, which will use the Barclays Capital U.S. Credit Bond Index as its benchmark, will invest at least 80 percent of its assets in investment-grade corporate bonds and other corporate debt securities. Class A shares come with an expense ratio of 78 basis points, while Class T shares sport an 80-bps expense ratio and Class C shares cost 153 bps, according to an SEC filing.

With the launch, Fidelity spokeswoman Sophie Launay said the firm is filling a gap and responding to customer demand.

"We have not had a fund that specifically targets the corporate bond sector, which represents 20 percent of the investment-grade bond market," she said.

Fidelity officials were also quick to address investor concerns regarding the near-term outlook for bond returns given the possibility of rising interest rates.

"It's important to note that historical data shows that even during periods of rising rates, the frequency and magnitude of negative returns for bonds was far lower than that for stocks, suggesting an allocation to bonds still reduced the volatility of an investment portfolio, stated John McNichols, senior vice preisdent of investmenet product management at Fidelity Personal Investments. 

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