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Rating:Reuters Attacks a $224B Fidelity Product Suite Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, March 06, 2018

Reuters Attacks a $224B Fidelity Product Suite

News summary by MFWire's editors

The Boston Behemoth is under fire over a core, $224-billion product suite that generates nearly $1 billion in fees. The criticism underscores the difficult new environment for active asset managers, even the giants.

Yesterday in a special report, Reuters attacked Fidelity's Freedom Funds target-date fund family. On the one hand, Reuters highlights "a decade-long trend of subpar performance" in the Freedom Funds. On the other the news service worries about the Freedom Funds' more recent outperformance as a sign that Fidelity is now taking too much risk in the TDFs. And through it all, Reuters notes, Fidelity's TDF marketshare has slipped (though Fidelity's TDF AUM has still grown as the total size of the TDF market has increased dramatically).

Put in starker, more general terms: take too little risk and risk underperformance and outflows; correct that by taking on more risk, and be accused of being too aggressive and of being inconsistent. Is anyone else thinking of that one Kelly Clarkson song, "You Can't Win"?

The long piece offers tidbits from: Scott Cameron, chief investment officer at 401(k) plan advisor (KPA) shop Multnomah Group; Jeff Holt, analyst with Morningstar; Kendall Storch, a KPA with Longfellow Advisors; and Ron Surz, president of Target Date Solutions. Vin Loporchio, a spokesman with Fidelity, also weighed in.

Performance attracts inflows, as all fundsters know, and that holds true with asset allocation funds like TDFs, too. Yet asset allocation can have a big impact on performance, and what seems like the perfect TDF allocation one day can seem like a terrible one the next.

It's worth remembering, though, that while different TDFs will have varying strategies and results, another important comparison is between a TDF and individual investors' self-directed investment choices. It would be interesting to see how investors in the Freedom Funds and other TDFs compare over the long-term to those who self-direct. 

Edited by: Neil Anderson, Managing Editor


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