Fidelity Investments on Tuesday announced it was cutting to $5 million from $100 million the amount of target-date fund assets sponsors would need to qualify for offering the institutional premium class of the Fidelity Freedom Index Funds target-date family.
The strategy doesn't reflect an attempt to reach smaller clients but rather a "large swath" of sponsor-client sizes, said Daniel Terio, vice president for target-date products, in an interview.
The target-date fund investment minimum affects not only all institutional defined contribution clients such as 401(k) plans and 403(b) plans but also retirement accounts for individual investors, Mr. Terio said.
Mr. Terio offered no projections on how much extra business Fidelity hoped to garner with this strategy, adding that the new policy will "probably largely focus" on existing clients.
Adam Banker, a Fidelity spokesman, wrote in an email Tuesday that the lower investment minimum "is expected to save investors an estimated $7 million annually."
The institutional premium class, which has a total annual net expense of 8 basis points, is one of three classes for the Fidelity Freedom Index Funds.
The investor class, which has no investment minimum, has a total annual net expense of 12 basis points. The premier class has a $2 billion investment minimum, which remains unchanged, and a total annual net expense of 6 basis points.
For the 12 months ended June 30, Fidelity had a total of $253.6 billion in target-date assets under management, according to the annual Pensions & Investments survey published in October. Fidelity placed third behind second-place BlackRock ($255 billion) and first-place Vanguard Group ($631.6 billion).
Fidelity's action Tuesday follows by five weeks the announcement by Vanguard Group that, effective immediately, it was cutting to $5 million from $100 million the minimum target-date assets plans would need to offer its target retirement funds. The action affects primarily 401(k) plans and 403(b) plans.
