Fidelity Bets on Zero-Fee Index Funds

Free mutual funds. It sounds fishy—something that might be advertised on a late-night infomercial. But whenFidelity Investments unveiled two index fundswithout annual expense charges on Aug. 1, it was the real deal. And if you’ve been watching the money management industry closely, it felt almost inevitable. Several index mutual funds and exchange-traded funds from Fidelity and others were already charging less than a dime for every $100 invested. Why not let the last pennies drop?

The fact that Fidelity was the one to go there is more interesting. The Boston money management company built its reputation on the cult of the star money manager, from Gerald Tsai Jr. in the 1960s and Peter Lynch in the ’80s to William Danoff today. But in fact it long ago moved beyond selling just stockpicking expertise. Under longtime Chief Executive Officer Edward “Ned” Johnson III and now his daughter Abigail, Fidelity has focused on being a financial superstore.

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