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Fidelity’s Largest Money Market Fund Waives $247 Million of Fees

Miles Weiss
·2 min read

(Bloomberg) -- Fidelity Investments has waived nearly $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 $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.

“We have experience managing our money market funds in near-zero interest rate environments and are well prepared to manage them for extended periods of extremely low interest rates,” Keller said in an email.

The financial 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 $1 a share.

Fidelity Government’s net assets totaled $209 billion at the end of October, up from $143 billion a year earlier. But the fund’s interest income on its holdings plummeted to $208 million from $1.5 billion during the same period last year. After the $247 million of waivers, the fund’s fees and expenses totaled $198 million, according to the filing, compared with $303 million in the first six months of the prior fiscal year.

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