Late last week, a press release entitled, "Fidelity Investments Launches Conservative Income Bond Fund," announced the latest entrant into the "enhanced cash" or ultra-short bond fund space. The subtitle says, "Short-Duration Bond Fund Seeks to Obtain High Level of Current Income Consistent With Preservation of Capital," and the release explains "Fidelity Investments today announced the launch of Fidelity Conservative Income Bond Fund, a bond fund that invests primarily in a combination of money market and high quality, investment-grade debt securities with short durations."
It adds, "The new fund will be managed by James K. 'Kim' Miller, a 20-year Fidelity veteran with significant experience in managing funds with a primary focus on capital preservation." Miller previously managed Fidelity's largest taxable institutional money funds, the $66 billion Fidelity Inst MM: MM Portfolio and the $70 billion Fidelity Inst MM: Prime.
Miller says, "The aging U.S demographics and the recent volatility in both the equity and fixed-income markets have heightened demand by investors of all types for shorter-term investment products to help them manage risk within their portfolios. Fidelity Conservative Income Bond Fund should appeal to relatively conservative, income-oriented investors with a time frame of at least six months to one year who are looking for exposure to high quality debt securities with short durations and are willing to accept some fluctuation in their fund's share price."
The release continues, "Fidelity Conservative Income Bond Fund seeks to obtain a high level of current income consistent with preservation of capital by normally investing at least 80% of its assets in U.S. dollar-denominated money market and high quality, investment-grade debt securities of all types, and repurchase agreements for those securities. The fund's benchmark index is the Barclays Capital 3-6 Month U.S. Treasury Bills Index and it will normally maintain a dollar-weighted average maturity of 0.75 years or less. It offers two share classes -- a retail class (FCONX) and an Institutional class (FCNVX)."
Miller explains, "Over the years, Fidelity has developed great expertise in bond and money market investing. I intend to utilize that experience for this fund.... Recent developments have led to the creation of additional potential investments for fixed-income funds along the shorter segment of the yield curve, and Fidelity Conservative Income Bond Fund will seek to take advantage of those opportunities. Through extensive fundamental credit and quantitative research, I will look to identify relative value opportunities within the universe of high quality, short duration instruments."
Finally, the release says, "Miller joined Fidelity in 1991 as a municipal bond credit analyst. He became a municipal bond trader in 1998, and later that year, accepted a position as a taxable credit analyst. From 2001 to 2003, Miller managed a number of Fidelity municipal money market funds. He managed VIP Money Market Portfolio from 2003 to 2011, and managed Fidelity Institutional Prime Money Market Portfolio from 2004 to 2010, and Fidelity Institutional Money Market Portfolio from 2003 to 2011. He will continue to manage institutional separate accounts and comingled pools."
Fidelity's offering is the latest entrant in the newly nascent ultra-short bond or "enhanced cash" market. (See our Oct. 1, 2010, Crane Data News, "JPMorgan Rolls Out Ultra-Short Money Mkt Fund, Enhanced Cash Fund and see information on Dreyfus Institutional Income Advantage Fund (DLASX).) The space beyond money market funds has been attracting interest due to the near zero yields on "cash". But unlike the space's previous rise and fall, the launches this time around are steering clear of any stable NAV offerings or any hint of being a money fund "plus" offering.
