Fidelity Investments has launched 11 funds focused on generating steady income for retired seniors. The launch followed a similar launch by The Vanguard Group Inc., who will launch three similar funds in the next couple of months. Fidelity and Vanguard are the largest and second largest mutual funds in the country.
The move by both companies will likely force competitors to do the same. Industry experts say that they expect fund companies with a solid 401 (k) plan market to announce similar fund launches.
However, a number of major fund companies have only admitted to closely monitoring open-end managed-payout funds. This type of fund has been part of a number of closed-end funds for awhile. However, closed-end funds only appeal to a small section of investors.
Lipper Inc. says that at the end of August, the collective net asset value of closed-end funds was $259. 28 billion. Closed-end funds are not as popular as open-end mutual funds because they are more complicated. They can trade at a discount or premium to their net asset value.
The Investment Company Institute says that in August, combined net asset value of open-end mutual funds was $11.49 trillion.
Fund advisers are enthusiastic about more open funds with managed-payout features. One of the reasons the new funds offered by Vanguard and Fidelity are generating interest is that they come with low expense ratios. Some skeptics, however, warn that this type of fund can result in abusive and fraudulent investment sales.
Fidelity says that the new funds with managed-payout features will make payouts by using principal. The funds will liquidate when they reach a designated date.
If you have lost money as an investor because you were the victim of fraudulent or abusive investment sales practices, contact Shepherd Smith and Edwards today. One of our experienced securities fraud attorneys will be happy to offer you a free case evaluation.
Related Web Resources:
New Funds for Retirement Payouts, Wall Street Journal, October 14, 2007
Others likely to follow lead of Fidelity, Vanguard, Investment News, October 8, 2007
Vanguard to Broaden Retirement Income Solutions with Three New Managed Payout Funds, Insurance Newsnet, September 27, 2007