BOSTON--(BUSINESS WIRE)--Fidelity Investments®, one of the largest and most diversified global asset management firms with more than $2.2 trillion in managed assets1, today announced the launch of Fidelity Municipal Income 2025 Fund -- an addition to Fidelity’s Defined Maturity Funds (DMF) lineup that seeks to bridge the gap between individual bonds and bond funds.
“With aging demographics, the need for income-specific investment solutions among U.S. investors will only continue to grow,” said Nancy Prior, president of Fidelity’s Fixed Income division. “Extending the lineup will maintain a range of target maturities for investors managing varying income needs.”
The Fidelity DMFs provide an investment option to investors interested in tax- exempt income over defined periods of time. Three potential uses for these funds include: 1) save for a goal, 2) reduce the risk of rising rates and 3) supplement an individual bond portfolio. As the Fidelity Municipal Income 2017 Fund2 nears its maturity date, Fidelity Municipal Income 2025 Fund will be added to the existing series of DMFs with current maturity years of 2017, 2019, 2021, and 2023.
Fidelity Municipal Income 2025 seeks as high a level of current income, exempt from federal income tax, as is consistent with the preservation of capital by normally investing at least 80% of assets in investment-grade municipal securities whose interest is exempt from federal income tax.
Fidelity will actively manage the fund to take advantage of opportunities to add value through professional management, credit analysis, diversification and risk management. The duration, however, will be tightly constrained to the stated target maturity date. Similar to Fidelity’s other DMF funds in the lineup, Fidelity Municipal Income 2025 will be managed by Fidelity’s municipal bond team.
“The DMF 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,” Prior added.
For investors concerned about interest rate and reinvestment risk, these innovative funds offer a way to reduce volatility and provide a declining exposure to interest rate risk as each fund approaches a specific maturity date.
The current offering includes funds with target maturity dates of 20173, 2019, 2021, 2023, and 2025. They are a series of open-ended mutual funds, each of which invests in municipal bonds that are clustered around a specific maturity. With “maturities” staggered two years apart, the funds allow investors the opportunity to invest in multiple DMFs with different end dates similar to the exercise of laddering individual securities. At its target end date, each fund will distribute its assets to shareholders and allow for reinvestment at then current interest rates.
The new fund is available directly to investors, as well as through advisors at banks, insurance companies and broker-dealers via Fidelity Advisor Funds classes A and Institutional. The retail class is sold without a load and has a total expense ratio of 0.40%. The Advisor share classes have a total expense ratio of 0.65% for Class A and 0.40% for the Institutional Class. The minimum investment will be $10,000 for each of the retail class, Advisor Class A and Institutional.
About Fidelity Investments
Fidelity’s mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $6.1 trillion, including managed assets of $2.2 trillion as of April 30, 2017, we focus on meeting the unique needs of a diverse set of customers: helping more than 26 million people invest their own life savings, 23,000 businesses manage employee benefit programs, as well as providing more than 12,500 financial advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.
Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties.
The municipal market is volatile and can be significantly affected by adverse tax, legislative, or political changes and the financial condition of the issuers of municipal securities.
Defined Maturity Funds are not designed for investors seeking a stable NAV or guaranteed income.
As the fund approaches its liquidation date, the fund's securities will mature and the fund may reinvest the proceeds in money market securities with lower yields than the securities previously held by the fund. Although money market funds seek to maintain a stable NAV of a $1.00 per share, this is not guaranteed and they may in fact lose money.
In addition, the amount of the fund's income distributions will vary over time and the allocation of returns between fund distributions and liquidation proceeds will not be predictable at the time of your investment resulting in a gain or loss for tax purposes. A portion of fund distributions may be subject to state or federal income taxes, AMT, or taxable as capital gains.
To protect existing shareholders and to ensure orderly liquidation of the funds, the funds will close to purchases for new and existing shareholders 12 months prior to their maturity date. Defined Maturity Funds are not designed for investors seeking a stable NAV or guaranteed income.
Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917
Fidelity Investments Institutional Services Company, Inc.,
500 Salem Street, Smithfield, RI 02917
National Financial Services LLC, Member NYSE, SIPC,
200 Seaport Boulevard, Boston, MA 02110
© 2017 FMR LLC. All rights reserved.
1 As of April 30, 2017.
2 To be liquidated on or about July 7, 2017.