Fidelity pushes stock fund managers on performance

BOSTON, Wed Jun 13, 2012 – Top portfolio managers at Fidelity Investments are getting more scrutiny than ever of their investment decisions as the Boston-based mutual fund company works to reverse a pattern of inconsistent performance.

Stock mutual fund performance, according to Fidelity’s own internal assessment, has ranged from great to lousy over the past few years. In 2008, Fidelity hit rock bottom when its stable of stock funds beat only 36 percent of their peers during the height of the credit crisis.

Four years later, Fidelity executives concede their work is not finished.

“Turnaround is not the word I would use,” Brian Hogan, president of Fidelity’s equity division since 2009, told Reuters in an interview. “That would suggest we are done showing improvement.”

Investors are not waiting around. They yanked $9 billion from Fidelity’s diversified stock funds in 2012 through May after pulling $21 billion last year and $15 billion in 2010, fund researcher Lipper, a unit of Thomson Reuters, said.

American Funds manager Capital Research & Management was the only firm doing worse over the past few years, Lipper said. Between them, the two wounded giants accounted for almost three quarters of the entire industry’s outflow of $89 billion from the category last year and two-thirds so far this year.

Competitors like T. Rowe Price Group Inc. and Vanguard Group, meanwhile, each had stock fund inflows this year of $2 billion and have experienced positive flows for the segment every year since the end of 2008, Lipper said.

Fidelity Investments facing ‘thousands’ hit by Facebook woes

BOSTON, Thu May 24, 2012 – Fidelity Investments said it was working with “thousands” of brokerage clients affected by trading issues that have engulfed Facebook Inc.’s much-anticipated initial public offering, according to a source familiar with the situation.

The social media site’s IPO has been steeped in controversy since it started trading last Friday.

Almost a week later, many investors have found that their orders for Facebook were not executed at the prices they thought, said advisers, who declined to be identified because they are not allowed to speak to the press.

All Facebook stock trades in clients’ accounts from May 18 have been confirmed, a Fidelity spokesman said.

“On behalf of our customers, Fidelity’s senior management has been working with the regulators, market makers and Nasdaq to represent all of our customer’s trading issues from May 18, and we will continue to do so until we are confident that Nasdaq has done everything it can to mitigate the impact to our customers,” the spokesman said.

Nasdaq had all orders, executed or not, returned to member firms by 1:50 p.m. EDT on Friday, according to a trading alert issued by the exchange on Monday morning.

Fidelity, a mutual fund company that also runs a large brokerage, issued a special notice to customers who submitted orders to buy Facebook shares on Friday, saying they may have experienced delays in status updates.

“We realize that some customers still have questions about how these delays may have affected their trading activity,” Fidelity said in the notice.

“We understand that Nasdaq is working with federal regulators to determine what, if any, accommodation might be made. However, customers should assume that any shares of Facebook stock currently credited to their accounts are owned by them and available for trading.”

Fidelity launches two new stock funds to tap global dividends

BOSTON, Thu May 10, 2012 – Fidelity Investments has tapped one of its up-and-coming portfolio managers to run two new mutual funds geared toward finding companies around the world that have stable cash flow and a willingness to pay dividends.

Boston-based Fidelity, which manages $1.6 trillion in assets, said on Thursday that Ramona Persaud would run two global equity income funds.

It’s the first time Fidelity has offered an equity income fund with a global reach. It now offers 10 equity income-oriented funds with more than $32 billion in assets under management.

With near-zero interest rates in the United States and financial turmoil in Europe, Fidelity is betting that investors nearing retirement or already in retirement will embrace the two funds that seek income-producing stocks around the globe.

Global stocks excluding the United States have delivered a dividend yield between 2 percent and 3.5 percent over the past decade, compared with a dividend yield of 1 percent to 2 percent for U.S. stocks, according to Fidelity.

“The gap is even higher when a global equity income subset of global equities is compared with global and U.S. equities,” a research report from the money manager said.

Fidelity money fund clients react negatively to SEC proposals

BOSTON – Fidelity Investments, the largest money-market fund manager, recently warned U.S. regulators that more than half of its money fund clients would move all or some of their assets out of the investments if the net asset value of the funds was allowed to fluctuate.

The warning comes as the U.S. Securities and Exchange Commission weighs controversial proposals to add more regulation to the $2.7 trillion money-market fund industry. SEC Commissioner Mary Schapiro has been pushing for more reserves and to do away with the money funds’ fixed $1 net asset value.

The industry vehemently opposes more regulation.

On Tuesday, the Wall Street Journal reported that Federated Investors Inc.  Chief Executive Christopher Donahue plans to sue the SEC if the new regulations interfere with his firms’ ability to do business. Federated manages about $256 billion of money-market fund assets.

Meanwhile, in a February 3 letter to the SEC, Fidelity General Counsel Scott Goebel shared the Boston-based company’s research on how investors might react to potential reforms. Fidelity had $433 billion in money-market fund assets under management at the end of 2011, representing 10.9 million accounts among retail and institutional investors.

Reforms being considered by the SEC “could spark retail and institutional investors to pull significant amounts of assets out of money-market mutual funds, leading to unintended consequences for the financial markets and U.S. economy,” Fidelity said.

Fidelity’s Abby Johnson secures another key role in the company

BOSTON ― In a sign of shifting power inside Fidelity Investments, Chairman Edward C. Johnson III has relinquished a central role, giving his daughter Abigail Johnson the title of chairman of the company’s flagship mutual fund business.

Abigail Johnson in late February became chairman of Fidelity Management & Research Company, which manages about $700 billion in discretionary client assets, according to disclosures made with the U.S. Securities and Exchange Commission.

That change, until now, slipped by unnoticed in individual mutual fund prospectuses that have trickled out over the course of a number of months. But analysts see the title change as yet another sign that Abigail Johnson is a leading candidate to run a family-held company with $1.54 trillion in total managed assets.

“Incrementally, they continue to position her to run the whole of it because the whole of it will eventually belong to her,” said John Bonnanzio, who edits a newsletter for Fidelity investors.

Edward “Ned” Johnson is 81 and has been running the parent company, FMR LLC, since 1977. But in January, he relinquished his role as trustee and chairman of a board that oversees stock and income mutual funds. His longtime top lieutenant, FMR Vice Chairman James Curvey, stepped in as acting chairman. Curvey is 76.

Then about a month later, Abigail Johnson, 49, added the Fidelity Management & Research chairman’s title, according to disclosures to the SEC. Fidelity spokeswoman Anne Crowley downplayed the change, describing it as a “corporate formality.”

“Abby has for many years served as director of FMR LLC, the parent company, and also as vice chairman of the board of directors for the entire firm,” Crowley said in an email message. “These are much higher profile roles at the parent company” than the new role at Fidelity Management & Research.

Last year, though, Fidelity fanned the flames of succession talk when it named Abigail Johnson and Ronald O’Hanley to top executive roles that essentially split the duties for running the company. Analysts said the move made sense because of Fidelity’s size and Edward Johnson’s age.

“Clearly, (Edward Johnson) is stepping away from Fidelity duties,” Bonnanzio said. “He has to … It’s a big company with big responsibilities. I don’t know too many people in their 80s who can do all of that.”

Indeed, several former Fidelity senior executives who have left the company in recent years say that Edward Johnson’s duties are more part time than anything else. Of course, Fidelity has maintained, as recently as May, that the octogenarian is “active and fully engaged in running the company and has no plans to retire,” according to a company statement issued then.

Nevertheless, Fidelity last year plucked O’Hanley from the senior management ranks of Bank of New York Mellon to play a major role inside the company. He is Fidelity’s president of asset management and corporate services while Abigail Johnson runs Personal, Workplace and Institutional Services, Fidelity’s largest business organization.