Fidelity Investments Reorganizes Rutland Square Trust II

Updated with new information

Fidelity Investments is planning to reorganize a trust of investment funds provided to clients for retirement-managed accounts offered through Fidelity Personal & Workplace Advisors, the firm disclosed in a securities filing Friday.

Fidelity plans to transfer all assets of the $59.846 million Strategic Advisers Large Cap Fund and all assets of the $9.430 million Strategic Advisers Small-Mid Cap Fund to the Strategic Advisers U.S. Total Stock Fund—pending shareholder agreement with reorganization proposals. The Strategic Advisers U.S. Total Stock Fund is a new fund and does not have assets. 

Fidelity-owned investment adviser and asset allocator Strategic Advisers LLC on May 6 separately filed a prospectus with the SEC for the U.S. Total Stock Fund to trade under the ticker (FSAKX).

The fund reorganizations are necessary for “providing opportunities for improved investment outcomes from reducing redundant risk mitigation strategies and reducing the need to trade across funds and potentially realize gains for customers in taxable accounts,” notes Fidelity in the SEC filing.  

Each fund’s board of directors has reviewed the proposal and approved the reorganization, noting it will not result in a dilution of the interests of the shareholders of either fund. The consolidation under the total stock fund benefits Fidelity by lowering the number of funds the firm is managing, according to Fidelity’s securities filing.

The reorganizations will affect investment funds in the Fidelity Rutland Square Trust II. The trust holds 15 Strategic Advisers’ funds, says Fidelity, by email.  

The reorganized U.S. Total Stock Fund—inclusive of the new share class—is expected to have a total expense ratio that is the same as Large Cap Fund, according to the filing.  

Strategic Advisers has contractually agreed to lower management fees on of the Large Cap Fund and Small-Mid Cap Fund in an amount equal to 0.25% of the fund’s average daily net assets through September 30, 2026, and for the U.S. Total Stock Fund through September 30, 2027, the regulatory filing shows.

“Shareholders are expected to benefit from a projected decrease of 1 bp in total expenses when comparing the projected total annual operating expenses of U.S. Total Stock Fund to the weighted average expense ratio of both target funds,” says the filing.

There is no minimum balance or purchase minimum for fund shares.

If the proposed reorganizations are not approved, the funds will maintain their current expense structures.

The proposals will be presented to shareholders at a special meeting on July 9 at 8:00 am. Each shareholder of U.S. Total Stock Fund is entitled to one vote for each dollar of net asset value of the fund that shareholder owns, with fractional dollar amounts entitled to a proportionate fractional vote, according to the filing.

The fund reorganizations are not a taxable event.

Strategic Advisers, a registered investment adviser, manages nearly $908 billion in assets under management. Strategic Advisers Funds are mutual funds, offered exclusively to clients enrolled in Fidelity Wealth Services.

Fidelity Investments provides discretionary investment management for a range of managed accounts offered through Fidelity Personal & Workplace Advisors LLC.

Investing in a managed account service aims to benefit participants with personalized savings and investment recommendations from an independent registered investment adviser. Managed accounts are an alternative arrangement of retirement planning and investing to target-date funds inside 401(k) plans, seeking greater returns with investment strategies personalized to individuals.

Strategic Advisers LLC investments in Fidelity retirement-managed accounts are restricted to offerings from the adviser or their affiliates. Shares are available only to certain discretionary investment programs offered by the adviser or its affiliates.

Representatives of Fidelity declined comment on the reorganization, referring questions to its securities filing.