Fidelity offer of no-fee index funds hurts shares of rivals

By Tim McLaughlin and Ross Kerber

BOSTON (Reuters) – Fidelity Investments’ plan to launch no-fee index funds hurt the shares of rival asset managers, including BlackRock Inc (NYSE:), on Wednesday as investors worried about lower profits.

“This news has likely led to the significant selling off of asset manager stocks today with many of the stocks we track down (3 percent to 5 percent) versus flat for the ,” Wells Fargo (NYSE:) analyst Christopher Harris said in a research note.

“We wouldn’t think the Fidelity funds in and of themselves would lead to much change with respect to asset flows, but investors are likely concerned about the follow-on effects,” Harris said. “For instance, do other passive index providers lower their fees in response?”

Publicly-traded asset managers whose shares declined on Wednesday include BlackRock down 4 percent at midday, Legg Mason Inc (NYSE:) down 5 percent, and T. Rowe Price Group down 3 percent.

Boston-based Fidelity said the Zero Total Market Index Fund and the Zero International Index Fund will be available to investors on Friday.

“Investors will pay a 0.00 percent fee, regardless of how much they invest in either fund, while gaining exposure to nearly the entire global stock market,” Fidelity said.

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