Fidelity Follows Rivals With Reduced-Volatility Offering
Fidelity Investments, the second-largest mutual-fund company, introduced a multi-asset-class investment product that seeks to limit risk by avoiding sharp swings in the value of its holdings.
The Fidelity VIP Target Volatility Portfolio, available only through variable annuity and life insurance products, will be managed by Xuehai En and Bob Vick, the Boston-based company said today in a statement. The managers will invest mainly in global stocks, U.S. investment-grade bonds and cash using Fidelity mutual funds, exchange-traded funds and index futures, according to the statement.
“Turbulent market swings like the ones we’ve witnessed over the past decade can far exceed the risk tolerance of many investors,” En said in the statement. “We believe managing volatility provides the opportunity for more consistent returns over time.”
Janus Capital Group Inc. (JNS), Invesco Ltd. (IVZ) and BlackRock Inc. (BLK) are among rivals that have tried to lure investors out of traditional bond and cash funds with products that promise lower risk than stocks by spreading money across asset classes. Sales of U.S. asset-allocation funds peaked at $59 billion in 2004, two years after the collapse of the technology-stock bubble. Investor deposits rose to $25 billion in 2012 from about $14 billion in each of the previous two years, according to Chicago-based Morningstar Inc. (MORN)
The new Fidelity product will target 10 percent volatility over rolling one-year periods. The managers will use a blended benchmark that has a 42 percent weighting in the Dow Jones U.S. Stock Market Index, 18 percent in the MSCI EAFE Index of developed-market non-U.S. stocks, 35 percent in the Barclays U.S. Aggregate Bond Index and 5 percent in the Barclays U.S. 3-Month Treasury Bellwether Index.
To contact the reporter on this story: Christopher Condon in Boston at email@example.com
To contact the editor responsible for this story: Christian Baumgaertel at firstname.lastname@example.org