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A. We had some rules of thumb. Typically, we
felt that for an equity mutual fund to be a viable size
where it would make a profit, it had to be about 100
million or more. On a bond fund where we charge lower
fees, typically, we would look for a fund to be about
200 million, and on a money market fund, where there is
a lot of transaction activity and higher expense,
typically, you needed 500 million or more for a fund to
be profitable.
Q. And what happens if a fund doesn't reach that
size, what does Fidelity do with the fund in that case?
A. It depends. First of all, we tend to give
funds a long time to become successful because you
never know when you launch a fund when a particular
investment discipline may be in favor with investors.
Secondly, as I said, one of our objectives was to
have a very robust, comprehensive line of funds, so if
we felt ultimately, this investment concept might work,
we would tend to keep it open.
We would--sometimes we would merge funds that were
unsuccessful. We--we are very reluctant to close a
fund because typically, there are some investors in any
fund, and it's expensive to close a fund, and you run
the risk of creating bad will with those shareholders,
so--and it is not all that expensive to maintain a fund
once it's up and going.
In addition to potential future revenue from the individual
contracts with each new RIC, the new RIC's were expected to
produce synergistic benefits to petitioner's entire family of
funds. One of the reasons for launching a new RIC was to provide
existing and future investors greater investment options so that
these investors would continue, and increase, their investment in
petitioner's family of funds. Having a larger number of
investment vehicles from which to choose allows the investor to
shift investment from one fund to another within the same fund
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