Years ago I overheard a co-worker on the telephone ordering tickets for an event.  The box office clerk included a $3/ticket “convenience fee” when summarizing the transaction causing my co-worker to ask, “For whose convenience?”

When the mutual fund industry rolls out a new product it makes one wonder whether it’s necessary and useful or whether it’s dressed up and sold as such to mask the real winner – the fund industry itself.

Recently Vanguard and Fidelity – two of the industry’s heavyweights – announced the rollout of a new fund and tweaking of an existing fund lineup.  The former will offer the Vanguard Global Minimum Volatility Fund while the latter will increase the equity stake in its Freedom family of funds – the “set it and forget it” lineup of asset allocation funds.

Vanguard’s attempt appears at least on the surface as mildly investor-friendly.  What investor wouldn’t want reduced volatility?  At Apollo we’ve written extensively about volatility being the real issue that keeps investors awake at night.  Undoubtedly you’ve read our tired comparison to air travel and turbulence.

Fidelity’s attempt is a bit more shameless.  Increased equity exposure has nothing to do with being a “better” or “more correct” asset allocation mix.  The strong equity market of the recent past has benefited fund families whose asset allocation funds have a heavier equity exposure in their 2020 or 2025 or 2030 fund relative to Fidelity’s 2020 or 2025 or 2030 fund.  That poor relative performance has caused Fidelity to lose assets under management.

So who exactly benefits by these moves?  Vanguard will benefit as investors afraid of volatility will see the paternalistic fund family (a carefully crafted image no less) as providing a solution to the “problem.”  Fidelity will benefit as performance-chasing investors will stay with or flock to the Boston behemoth without researching why there’s been a performance difference between its asset allocation funds and those from the competition.

When the mutual fund industry rolls out a new product it almost always is a result of pandering to the flavor du jour.  They can be as shameless as the media.  Find a TV show that works and the next season finds 50 knock offs.  Bang out a hit movie and there’s bound to be a sequel.  Find a “problem” in the investing world and every fund family will rush out a “solution.”

Are investors being served by Vanguard’s and Fidelity’s moves?  Caveat emptor.