C Citigroup Inc

Money manager Fidelity Investments plans to slash prices on more than two dozen funds, a concession to an industry movement toward cheap products that track the market.

The changes will lower Fidelity's fees below or on par with those at low-cost pioneer Vanguard Group and Charles Schwab, another firm that offers ultralow customer expenses. Fidelity oversees retirements for millions of Americans.

Fidelity's fee cuts mark a more aggressive approach by the privately held company long known for pricier investment products run by star stock pickers. In recent years, the Boston money management giant has lost some cash to rivals emphasizing so-called passive investments that mimic indexes for a fraction of the cost of a typical mutual fund.

Fidelity's discounts will reduce the net fees on the investor share class of the Fidelity 500 Index Fund, which mirrors the S&P 500, to 0.09% from 0.095%. That is the same as a comparable product at Charles Schwab Corp. and lower than the Vanguard 500 Index Fund Investor Shares fund, which costs 0.16%. Fidelity's price reductions are effective this Friday.

Fees across the money management industry are falling as firms duel for increasingly cost-obsessed investors and undercut each other on price to gain scale. The race to the bottom has forced some money managers to sell nearly free funds that are lower than their operating costs.

The result has been a boon for individual investors. In 2015, they paid lower fund fees than any previous year tracked by fund-research firm Morningstar Inc. The asset-weighted expense ratio for passive funds in the U.S. dropped to 0.19% at the end of May, compared to 0.26% in 2010. For actively-managed funds the asset-weighted fee is 0.78% down from 0.84% in 2010.

Investors pulled more than $300 billion from U.S. actively managed funds in the 12 months through the end of May, according to Morningstar, while investing upward of $375 billion in passive funds.

A main beneficiary of this shift to passive funds has been Vanguard. The Malvern, Pa.-based firm launched the first index fund for individual investors nearly 40 years ago and last year pulled in $236 billion from clients, an industry record. It has the lowest asset-weighted average expense ratio of any mutual-fund firm, according to Morningstar. The firm is owned by its funds' shareholders and automatically lowers fees as its funds grow.

Fidelity, on the other hand, has long touted its emphasis on actively managed investments. It remains one of the largest operators of funds that attempt to beat the market by handpicking winning stocks and bonds, according to Morningstar.

A more aggressive strategy for Fidelity's passively managed funds began under current Chief Executive Abigail Johnson, who succeeded her father, Edward "Ned" Johnson III. In recent months, the firm has moved to broaden its distribution of those products and boost their assets under management. Fidelity has offered index funds for 25 years.

"We are strong believers in the powers of active management and the value it can provide our customers. That view has not changed," said Colby Penzone, senior vice president for Fidelity's investment product group. "Active and passive can play a role in client portfolio," he said.

Fidelity's fee alterations will reduce prices on 27 of its index mutual funds and exchange-traded funds. The cuts at Fidelity affect funds that offer broad exposure to large-, mid- and small-cap indexes as well as a number of bond funds and ETFs that offer exposure to specific sectors.

Fidelity managed $2.1 trillion in assets at the end of May. In the firm's most recent annual report published earlier this year, Fidelity said investors withdrew a net $18.8 billion from its actively managed stock funds in 2015, "driven by investors' ongoing preference for passive equity products," but didn't disclose similar flow information for its passively managed funds.

Write to Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

June 28, 2016 14:25 ET (18:25 GMT)

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