Fidelity drew some of the wrong kind of attention from The Wall Street Journal over the weekend. The paper highlighted the fund behemoth's use of central funds by its lineup of index funds (and others). The hook to the article was provided by a software engineer who was disappointed to learn that one of his holdings -- Fidelity US Bond Index -- lagged its benchmark by 160 or so basis points last year. The fund missed its benchmark in part because of a 10 percent allocation to the Fidelity Ultra-Short Central Fund.

While the article has a somewhat negative tone (the headline refers to the central funds as "an enemy from within"), it does provide hints of the useful role that central funds can play for portfolio managers seeking to provide simple liquidity for their funds. On the negative side, The WSJ's Eleanor Laise points to the added complexity the funds create for those seeking information on fund holdings and the possibility of layering of fees. 

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