Fees, rates, redemptions hit Fidelity

Investors pulled $5.3 billion in 2012; better than the $36.3 billion yanked in 2011

Feb 19, 2013 @ 8:49 am (Updated 8:57 am) EST

fidelity, mutual funds, equities, stocks, bonds, vanguard

Fidelity Investments, the second- largest U.S. mutual fund company, said operating income declined 29 percent as fee pressure, low interest rates and redemptions from its active equity funds hurt revenue.

Earnings, excluding costs such as interest and taxes, decreased to $2.3 billion last year from $3.3 billion in 2011, the Boston-based company said today in its annual report to shareholders. Revenue declined 1.2 percent to $12.6 billion.

“Despite a challenging environment for revenue growth, Fidelity's financial services businesses made significant investments in 2012 to enhance the products, services and investment insights we offer our customers,” Edward C. Johnson III, chairman and chief executive officer, said in the statement.

Fidelity made its succession plan clear in August when it appointed Abigail Johnson, the chairman's daughter, as president. The firm has been losing market share to rivals focused on fixed-income and index-based products. Valley Forge, Pennsylvania-based Vanguard Group Inc., a pioneer in indexing, took in $141 billion in 2012.

Investors pulled a net $5.3 billion from Fidelity's asset-management unit, including $35.3 billion from equity funds. Bond funds gathered $17.3 billion, while bundled and asset-allocation products attracted $23 billion. Net withdrawals in 2011 totalled $36.3 billion.

Fidelity's expenses grew 9 percent to $10.3 billion, “primarily from sizeable strategic investments and related headcount growth,” the company said in the report.

Assets under management rose 9.5 percent to $1.67 trillion, helped by a 13 percent gain by global stocks as measured by the MSCI AC World Index.

Employees control 51 percent of the voting shares in Fidelity, and the Johnson family owns the other 49 percent. Ned and Abigail Johnson each hold at least 10 percent, according to regulatory filings.

-- Bloomberg News --

  @IN Wire

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