Author Topic: Fidelity proxy vote FXAIX  (Read 556 times)

celerystalks

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Fidelity proxy vote FXAIX
« on: April 15, 2020, 08:08:30 PM »
Just got an email for a special meeting proxy vote.

Fund wants to change from fundamental investment policy to non- fundamental policy for FXAIX, Fidelity 500 Index.

Not sure of the implications of this.. Any thoughts?

MustacheAndaHalf

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Re: Fidelity proxy vote FXAIX
« Reply #1 on: April 15, 2020, 08:10:41 PM »
Is there a link for non shareholders to view the information, or can you quote the wording of the change?

celerystalks

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Re: Fidelity proxy vote FXAIX
« Reply #2 on: April 15, 2020, 08:14:35 PM »
Is there a link for non shareholders to view the information, or can you quote the wording of the change?
« Last Edit: April 15, 2020, 08:21:38 PM by celerystalks »

MustacheAndaHalf

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Re: Fidelity proxy vote FXAIX
« Reply #3 on: April 15, 2020, 08:28:50 PM »
That second photo is much more helpful - thanks!

My understanding is that these funds are forced to pay licensing fees to Standard & Poors (S&P) for tracking the S&P 500 index.  Removing that requirement frees up the fund to stop paying that licensing fee.  The downside being the fund is being trusted to do it's own index, which is riskier than following a third party index.

I suspect it's motivated by the amount of churn in the S&P 500 recently.  As companies lost significant market cap, a number (I only recall Macy's, because I own shares) of stocks dropped from the S&P 500.  They became small cap stocks, showing another advantage of owing a total stock market fund.

Somewhere between S&P 500 churn, the license fee, and having a significant number of people who trust Fidelity, I think they're going to try making their own index to track.  It's less transparent, but I would trust them to follow something resembling the S&P 500 even after it's no longer a fundamental policy.  Fundamental policies can only be changed by a vote.

celerystalks

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Re: Fidelity proxy vote FXAIX
« Reply #4 on: April 15, 2020, 08:32:46 PM »
That second photo is much more helpful - thanks!

My understanding is that these funds are forced to pay licensing fees to Standard & Poors (S&P) for tracking the S&P 500 index.  Removing that requirement frees up the fund to stop paying that licensing fee.  The downside being the fund is being trusted to do it's own index, which is riskier than following a third party index.

I suspect it's motivated by the amount of churn in the S&P 500 recently.  As companies lost significant market cap, a number (I only recall Macy's, because I own shares) of stocks dropped from the S&P 500.  They became small cap stocks, showing another advantage of owing a total stock market fund.

Somewhere between S&P 500 churn, the license fee, and having a significant number of people who trust Fidelity, I think they're going to try making their own index to track.  It's less transparent, but I would trust them to follow something resembling the S&P 500 even after it's no longer a fundamental policy.  Fundamental policies can only be changed by a vote.

Thanks.

I donít control a lot of shares. But I am going to vote them against.

Something..something.. camel getting his nose under the tent..

terran

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Re: Fidelity proxy vote FXAIX
« Reply #5 on: April 15, 2020, 08:57:52 PM »
The S&P 500 recently announced that it would skip rebalancing this quarter and wait until next quarter. I wonder if this is related to that? Maybe Fidelity wants to stick with the spirit of the index rather than not rebalancing now as the index is doing?

MustacheAndaHalf

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Re: Fidelity proxy vote FXAIX
« Reply #6 on: April 15, 2020, 09:11:23 PM »
Wow, that published delay in rebalancing is even more surprising.
https://www.nasdaq.com/articles/sp-dow-jones-indices-delay-quarterly-index-rebalance-after-market-tumult-2020-03-13

Right now Vanguard S&P 500 holds 508 stocks to prevent spiking the prices as stocks enter the S&P 500.
https://investor.vanguard.com/etf/profile/portfolio/voo

Vanguard's S&P 500 used to hold 505 or 506 stocks.  I think they know what's coming, and they're buying potential S&P 500 stocks to avoid being "front run".  If you can predict more than 8 stocks that will move into the S&P 500, you could front run Vanguard by purchasing the stocks first (in front of Vanguard's buy orders) and then wait... Vanguard's demand pushes up prices, and when that bump is over, you sell.

I'm not sure if it will work - the COVID-19 situation could change, restoring normalcy... or S&P could delay again...  But it was a problem in the past, which is why Vanguard S&P 500 holds more than 500 stocks.

appleshampooid

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Re: Fidelity proxy vote FXAIX
« Reply #7 on: April 16, 2020, 11:30:34 AM »
Notably, Fidelity already created their own total market and total international indexes when launching their zero-fee funds in those classes. So, they could be preparing to do the same for their 500 funds.