While Fidelity International has struggled, the original U.S. business founded in 1946 by Edward Johnson the second has thrived under his son, Edward “Ned” Johnson the third, who at 81 is still chairman and chief executive.
Measured by assets under management the group is half the size of BlackRock, the world’s largest money manager with $3.5-trillion (U.S.). But Fidelity’s broader range of businesses mean that last year it made higher revenues and earnings than its listed peer. Operating profits rose 13 per cent to $3.3-billion on revenues of $12.8-billion.
At the centre of the group sit U.S. mutual funds, where Fidelity has more than a tenth of the market and manages more than 500 funds. Its largest, the $84-billion Contrafund run by Will Danoff, is the best performing large-cap growth fund over the last decade, according to Morningstar.
However, over recent years overall performance has been average. The largest manager of U.S. mutual and exchange traded funds until 2008, it was overtaken by Vanguard the following year, which had $1.79-trillion to Fidelity’s $1.46-trillion at the end of 2011, according to Lipper.
But the group also has a large distribution business, which has an extensive retail brokerage arm, offers third-party mutual funds to its customers and is the largest U.S. administrator of 401k retirement accounts. More than half of Fidelity’s assets under management are retirement related.
One wrinkle, though, is the question of leadership succession, and what Standard & Poor’s calls “a revolving door of senior managers and a never-ending realignment of the organizational structure.”
The latest big change was in 2010 when Fidelity, which embraces the Japanese philosophy of Kaizen, or continuous improvement, reordered itself into two main segments. One of these, the distribution arm, is run by Abigail Johnson, daughter of Ned, and the favourite candidate to ultimately replace him.