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http://www.usatoday.com/money/perfi/funds/2005-03-16-fidelity-breakup_x.htm?csp=26&RM_Exclude=Juno

Corporate accounts probably including 401Ks, foundations, and institutional investors will split from the mutual fund company.

Wonder what this means to the rest of us?
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Wonder what this means to the rest of us?

Probably bad news for those with IRAs at Fidelity that take advantage of the fact that many institutional mutual funds are available for low minimums (e.g., $2500 instead of $250,000). I hope I'm wrong.

Ken
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I hope you're wrong too. I have an IRA there and also a small variable annuity in which the only funds available are some of the 'advisor' funds, or their equivalents.

I wonder why they're doing this? Are they trying to get a firm handle on how much the individual accounts actually cost as opposed to the institutional accounts? It's hard to do that when your cost centers handle both types of accounts.

2old
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My understanding is that Fidelity is basically a family owned company. They could be splitting it up for tax or estate reasons to get ready to sell part of it or issues stock options on part of it without having to worry about giving up control of the parts they want to keep.

Of course if they do split it up then the extra layer of management may increase fees by 0.001%(or whatever) each year and when you are talking about managing around a trillion dollars that is not chump change when it is split up between a just a handful of people.

Greg
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They could be splitting it up for tax or estate reasons to get ready to sell part of it...

I would think they'd want to sell the individual account portion, as the institutional portion is probably the most lucrative from a profit standpoint. For the past few years they've had to lower their fund fees, first by getting rid of the loads on the Select funds, then by offering more index funds--it would seem that Vanguard's become a thorn in their 'individual account' side.

Hmmmm...Wonder who'd want to buy it?

2old
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It says they're going to create a "new company" that is "to be separate".

If it is a new company in the sense of spun off and owned by someone else, why bother to say it is separate - that's redundant. It just seems to me like careful wording if they're going to sell the institutional business...

Since its small, but growing quickly, I wonder if they're just setting it up as a "separate" but wholly owned subsidiary. So before it gets big and the books get too intermingled, they want to draw some clear lines.

That way, when it gets big, they have the option of easily spinning it off (or not).

just speculation...

-Joe
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