Vanguard Group makes a new move in the price-cutting war with Fidelity, lowering the eligibility threshold on its low-cost options of mutual funds, Admiral shares. This decision comes after Fidelity made its latest, much-advertised cuts on most of its index funds permanent in March 2005.

Vanguard does not lower its fee but offers the low-cost alternative with expenses amounting to as little as 0.09% of assets in some cases to a much wider circle of investors. If investors earlier required a $250,000 account balance or $150,000 in a Vanguard account, this limit is brought down to $100,000 that has to have been sitting with Vanguard for at least three years. The option to switch to Admiral shares will be offered starting May 10, and those who do not submit an application by July 2005, will be automatically transferred to the program then.

The group expects the number of shareholder accounts eligible for Admiral shares to rise than 700,000, nearly double of the previous number. The assets eligible will rise to $225 billion, constituting over one fourth of $825 billion in assets under management. However, for other shareholders, the expense ratio may have to rise to compensate for the privileges given to long-term wealthy clients.