Tough 2012 for Fidelity

Income fell 29% and earnings slid to $2.3 billion

Feb 24, 2013 @ 12:01 am

By Bloomberg News

Fidelity Investments, the second-largest U.S. mutual fund company, said that operating income fell 29% last year 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, from $3.3 billion in 2011, the company said Feb. 15 in its annual report to shareholders. Revenue declined 1.2% 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, said in a statement.

Fidelity made its succession plan clear in August when it appointed his daughter, Abigail Johnson, president.

The firm has been losing market share to rivals focused on fixed-income and index-based products. The 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 totaled $36.3 billion.

Fidelity's expenses grew 9% to $10.3 billion, “primarily from sizable strategic investments and related head count growth,” the company said in the report.

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

Employees control 51% of the voting shares in Fidelity; the Johnson family owns the other 49%. Mr. and Ms. Johnson each hold at least 10%, according to regulatory filings.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Behind the scenes of InvestmentNews' Best Places to Work

Benefits and vacation policies are important for hiring top talent, but giving employees a sense of ownership in decision-making is among the most important qualities, editor Fred Gabriel says.

Latest news & opinion

Why we must create a more diverse and sustainable financial planning profession

CEO explains how, why a firm should commit to conscious inclusion.

Pope Francis wants financial advisers to work like fiduciaries

Vatican bulletin admonishes advisers who act against the best interests of their clients.

Wells Fargo sees slowdown in advisers exiting this year

The 2016 banking scandal and public relations fiasco had alienated some of the firm's advisers.

States trying to save DOL fiduciary rule appeal rejection of effort to intervene

California, New York, Oregon ask for rehearing by full 5th Circuit Court of Appeals.

Employees at best places to work focus on the person — and the fun

Employees at best places to work firms focus on the person and fun.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print