(Bloomberg) -- Fidelity Investments is trying to beat Vanguard Group at its own game.

Fidelity will cut fees on 14 passive products, saying its stockand bond index mutual funds and sector exchange-traded funds nowhave net expenses lower than comparable Vanguard funds.

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The reductions, which take effect Aug. 1 and apply to most shareclasses, will save investors about $18 million a year, theBoston-based firm said in a statement Monday.

Vanguard, the pioneer of low-cost investing, has been challengedby a growing number of rivals that have matched and sometimesundercut the price it charges on index funds and ETFs. BlackRockInc. and Charles Schwab Corp. have also staked claims to territoryVanguard once had to itself.

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Fidelity, best known for stock pickers like the legendarymanager Peter Lynch, has been building up its passive business asinvestors dump active products in favor of those that trackindexes.

The firm had almost $300 billion in passive assets as of June30, according to Morningstar Inc., roughly 13 percent of its $2.3trillion total.

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The reductions affect funds such as the Fidelity Large-CapGrowth Index Fund, where expenses for the small investor shareclass will drop to 17 cents for every $100 invested from 21 centspreviously.

Revenue squeeze

In the first six months of the year, Fidelity’s active fundslost about $21.5 billion to net redemptions while its passive fundsattracted inflows of $20 billion, Morningstar data show.

The shift cuts into Fidelity’s revenue because active fundscarry significantly higher fees.

The firm’s biggest active stock fund, the $113.8 billionContrafund, charges 68 cents per $100. Its largest passive equityfund, the $119.9 billion Fidelity 500 Index Fund, charges 9 centsfor small investors and 3 cents for institutional customers.

Fidelity in June said more than 1,500 employees took a buyoutoffer announced in February, around the time Chief ExecutiveOfficer Abigail Johnson wrote in the firm’s annual letter that theindexing wave has created a more difficult world for moneymanagers.

In July, the firm dismissed hundreds of employees, according toa report by website Axios.

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