Fidelity Releases Defined Maturity Funds

Fidelity Investments has launched the Fidelity Defined Maturity Funds, a series of actively managed national municipal income funds, each with a set maturity date.

The series consists of four funds with different maturity dates: the Fidelity Municipal Income 2015 Fund, Fidelity Municipal Income 2017 Fund, Fidelity Municipal Income 2019 Fund, and Fidelity Municipal Income 2021 Fund.  

Fidelity reports that these are the first actively managed municipal bond defined-maturity funds in the market. The funds will be managed by Fidelity’s municipal bond team, and seek to bridge the gap between individual bonds and bond funds.  

The Fidelity Defined Maturity Funds are open-end mutual funds that seek to incorporate some of the attributes of individual bonds. They are professionally managed, diversified portfolios of municipal securities with defined end dates that invest primarily in investment-grade municipal bonds that are generally clustered around the funds’ defined end dates and seek as high a level of current income, exempt from federal income tax, as is consistent with the preservation of capital. 

To protect existing shareholders and to ensure orderly liquidation of the funds, the Defined Maturity Funds will close to purchases for new and existing investors approximately 12 months prior to their maturity date. Each fund is expected to liquidate and distribute its net assets to investors shortly after its defined end date.  

“These funds may be appropriate for income-seeking investors who are interested in combining the defined-maturity feature of individual bonds with the many features of bond funds, including diversification and professional management, thus removing much of the legwork of individual bond investing,” said Mark Sommer, co-manager of the Fidelity Defined Maturity Funds.

The new funds are available directly to investors, as well as through advisers at banks, insurance companies and broker-dealers via Fidelity Advisor Defined Maturity Funds (Classes A and Institutional). Each Defined Maturity Fund’s retail class is sold without a load and has a total expense ratio of 0.40%. The Adviser share classes have traditional Fidelity Adviser short-term bond fund pricing with a total expense ratio of 0.65% for Class A and 0.40% for the Institutional Class.