Fidelity stock index funds earn additional income by lending securities to qualified institutional borrowers.
A fund’s expenses are paid out of fund earnings. Given that the US tax code gives a tax preference to dividends that qualify for lower tax rates, it is prudent for fund managers to allocate non-qualified income to fund expenses. The table below shows the amount of security lending income earned by each fund in fiscal year 2018 and calculates its percentage ratio to total annual fund expenses.
|Fund||Net security lending income||Total expenses||% of expenses|
Table data is derived from fund annual reports for fiscal year 2018. The computations are derived from the linked spreadsheet: Fidelity index fund security lending.