Fidelity’s largest money market fund waives US$247 million in fees

Fidelity Investments has waived nearly US$ 250 million in fees and expenses for its largest money market fund, a sign of how low yields pressured the products in an unprecedented year.

The Fidelity Government Money Market Fund reported the figure for the six months ended Oct. 31 in a filing last week. Without the waivers, investors in the US$ 212- billion fund would have faced negative yields on their holdings.

Retail money market funds struggled this year as the U. S. Federal Reserve tamped down interest rates in response to the COVID-19 pandemic crisis. That made it difficult to generate enough interest income to cover expenses and still pay shareholders, leading to the fee waivers. As a result, managers face earning less revenue to oversee more assets.

“The question is not, ‘Are you waiving fees,’ but ‘ How much are you waiving fees and how badly are you hurt?’” said Peter Crane, the head of Crane Data, a money market research firm. “Clearly, if the number is in the hundreds of millions, the answer is ‘Ouch.’ ”

Fidelity spokesman Charlie Keller said the waivers reflect reductions across many of the fund’s expenses, not just management fees. He added that Fidelity is currently waiving fees on most of its money market funds to maintain positive yields.

The fallout from the pandemic has led to surging assets for Fidelity Government and other retail money market funds, which primarily invest in super-safe Treasuries and agency debt and seek to maintain a stable net asset value of US$1 a share.

Fidelity Government’s net assets totalled US$ 209 billion at the end of October, up from US$ 143 billion a year earlier. But the fund’s interest income on its holdings plummeted to US$ 208 million from US$ 1.5 billion during the same period last year.

After the US$ 247 million of waivers, the fund’s fees and expenses totalled US$ 198 million, according to the filing, compared with US$ 303 million in the first six months of the prior fiscal year.