Fidelity's Defined Maturity Funds aim to bridge fund versus bond gap

By Toni Weeks

San Diego, June 22 - Fidelity Investments has launched the Fidelity Defined Maturity Funds, a series of four national municipal income funds, each with a defined maturity date.

According to a press release, the open-end funds seek to bridge the gap between individual bonds and bond funds. The funds invest primarily in investment-grade municipal bonds that are generally clustered around the funds' defined end dates.

To protect shareholders and ensure orderly liquidation of the funds, the funds will close about a year before their maturity dates.

"When compared to a traditional bond fund, the price volatility of the Defined Maturity Funds is designed to decline as their underlying bonds approach maturity. However, unlike individual bonds, these funds do not return a pre-determined amount at the funds' defined end dates," co-manager Mark Sommer said in the release.

"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," he added.

The initial series consists of four funds with different maturity dates: Fidelity Municipal Income 2015 fund with a four-year maturity, Fidelity Municipal Income 2017 fund with a six-year maturity, Fidelity Municipal Income 2019 fund with an eight-year maturity and Fidelity Municipal Income 2021 fund with a 10-year maturity.

The Defined Maturity Funds are co-managed by three portfolio managers: Mark Sommer, Kevin Ramundo and Jamie Pagliocco.

Sommer joined Fidelity's fixed-income quantitative group in 1992 and was appointed portfolio manager in 1997. He currently manages state-specific and national municipal bond funds across the maturity spectrum.

Ramundo joined Fidelity in 2000 as a research analyst and was appointed portfolio manager in 2010. He currently manages several state-specific municipal bond funds and co-manages national municipal bond funds across the maturity spectrum.

Pagliocco joined Fidelity in 2001 and was appointed portfolio manager in 2006. Promoted to director of municipal bond portfolio managers in 2010, he is the lead manager for several Fidelity funds and state-specific municipal bond funds.

The new funds are available directly to investors and through banks, insurance companies and broker-dealers. Each fund's retail class is sold without a load and has a total expense ratio of 0.4%. The advisor share classes have traditional Fidelity Advisor short-term bond fund pricing with a total expense ratio of 0.65% for class A and 0.4% for the institutional class.

Fidelity, an asset management firm, has its headquarters in Boston.

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