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Schwab Gets Mutually Exclusive


Up Front: ON THE FUND FRONT

SCHWAB GETS MUTUALLY EXCLUSIVE

In your face, Fidelity. On May 9, giant discount broker Charles Schwab will expand OneSource, its successful no-broker-fee mutual-fund service, to institutional customers such as 401(K) plans. In a display of muscle aimed at grabbing the prized pension dollar, OneSource has bagged exclusive no-fee broker's rights to offer some hot funds. That's 34 of its 78 funds enlisted for the institutional market so far. Schwab execs pointedly note these funds--including Alger, SoGen, and Vista--aren't available from its main competitor, Fidelity Funds Network, the mutual-fund brokerage arm of the Fidelity fund family. Plus, many institutional OneSource funds are dropping their sales loads for OneSource clients.

Brokerage firms have a lock on their proprietary funds, but it's unusual to get exclusivity for others' funds. Schwab, though, is eager to protect OneSource, which handles $10 billion in assets, almost twice the size of Fidelity's nine-month-old no-fee program. Schwab launched OneSource in July, 1992, which allows retail clients to invest in 200 funds with no broker's transaction fees. The funds, hungry for fresh investments, pay Schwab for the business.

Fund officials listing only with OneSource say they're not married to Schwab. As long as they make OneSource their only no-fee program, they'll get a break on the fees they pay Schwab. But Fidelity pooh-poohs the idea of exclusivity. "Most funds want as wide distribution as possible," says Donna Morris, an exec at Fidelity.Jeffrey M. Laderman


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