Defined contribution plan participants and plan sponsors overwhelmingly prefer a short-form mutual fund prospectus, Fidelity Investments research shows.
Some 90% of plan participants and plan administrators surveyed said a short form met or exceeded participants' need for basic investment information. Two-thirds of participants said the short form is better because it is easier to understand and read than detailed long forms.
Fidelity was granted a no-action letter by the Securities and Exchange Commission earlier this year on using short forms for 401(k) plan participants.
Boston-based Fidelity and seven other mutual fund companies are simultaneously testing short forms with retail investors in an SEC-sponsored trial.
Fidelity commissioned the Boston Research Group to conduct research among 200 plan participants and 44 plan sponsors. Short-form prospectuses for the Fidelity Magellan, Intermediate Bond and Retirement Money Market Portfolio Funds were tested. Each prospectus is a double-sided sheet and presents questions and answers about the fund's goals, investment strategies, risk level, expenses and historical performance.
Fidelity is conducting further tests of the popularity of the short forms with two companies currently involved in plan enrollment campaigns. Bob Reynolds, president of Fidelity Institutional Retirement Services Co., said Fidelity will evaluate the results of the research and may introduce short-form prospectuses for wide use by defined contribution plans later. Long form prospectuses will be available on request.