Fidelity: Profit Fell 39 Percent in '01
By Martha Slud
Wednesday March 6, 2:11 pm Eastern Time
NEW YORK (Reuters) - Fidelity Investments, the world's biggest mutual fund company, on Wednesday said net profits fell 39 percent in 2001 from the previous year, as revenues and assets under management dropped during the stock market sell-off.
The Boston-based fund giant, manager of the massive Fidelity Magellan (Nasdaq:FMAGX - news) stock fund, along with other investment firms has struggled with falling stock portfolio values. But the privately held company, which also runs retirement services, brokerage and benefits outsourcing businesses, said it posted record sales of bond and money market funds last year, helping offset stock fund declines.
Cost cuts also helped to maintain profits, it said.
``Fidelity's operating results for 2001 were respectable, given the slowing of the economy and the Sept. 11 terrorist attack,'' Chairman and Chief Executive Edward C. Johnson III wrote in the report.
Fidelity, formally known as FMR Corp., reported that net profits for all of its businesses fell to $1.32 billion last year from $2.17 billion in 2000.
Revenues declined about 11.8 percent to $9.8 billion from nearly $11.1 billion in the prior year.
The company attributed the revenue drop to lower equity asset levels and essentially flat inflows into its stock funds, as well as lower trading volumes at its brokerage unit. Fee revenue for managing money fell from 2000 levels, when the stock market hit new peaks and investors flocked to funds -- sending fee income soaring.
In a telephone interview with Reuters, Chief Financial Officer Steve Jonas forecast flat revenue growth for 2002 as long as the stock market stays roughly at current levels.
``Our plans for 2002 are to keep doing what we're doing -- to hold spending about flat,'' he said. ``We think that if the market goes sideways, our revenues ought to be pretty consistent.''
Assets under management at the end of 2001 slipped to $883.4 billion, down 4 percent from $919.8 billion in 2000.
Offsetting the decline in stock prices, Fidelity's money market funds took in nearly $30 billion last year, while its bond funds added a net $10 billion, Jonas said. Stock funds took in about $1 billion, he said.
The Magellan fund, the largest actively managed stock fund, had about $76.9 billion in assets at the end of January, according to a previous Fidelity report. Assets are down from $93.1 billion at the end of 2000.
Fidelity's overall asset drop last year was smaller than the broader stock market's losses, helping mitigate the company's profit decline, said Jim Lowell, editor of Fidelity Investor, an independent newsletter about Fidelity funds.
``I think Fidelity took some obvious body blows but the overall story here is they persevered through basically the worst two markets in three decades, and they are well positioned'' going forward, he said.
Fidelity's head count totaled 31,400 at year-end 2001, down 5.4 percent from 33,200 at the end of 2000, according to the annual report. The reductions have come from both attrition and job cuts, Fidelity said.
Fidelity, whose mutual fund competitors include The Vanguard Group and Stilwell Financial Inc.'s (NYSE:SV - news) Janus Capital Corp., said its stock funds outperformed 61 percent of their rivals on an asset-weighted basis last year, up from 49 percent in 2000.
However, performance on a three-year basis was weaker, with Fidelity stock funds beating 56 percent of their competitors, down from 61 percent.
Fidelity isn't aiming to manage funds that hit the top of the charts; rather it wants consistently strong performance, Jonas told Reuters.
``The objective is to have very good performance year in and year out -- we do not try to manage for top decile performance,'' he said. ``We are trying to have very good performance beating at least two-thirds of our competitors on a three year basis.''
Fidelity, known for attracting top talent, recently has seen a small exodus of portfolio managers. Since the beginning of the year, American Express Financial Advisors -- which is struggling to boost its fund operation -- has hired away four Fidelity stock pickers. Several other Fidelity fund managers also have departed.
``We never like to lose any of our talented people,'' Jonas said. He said Fidelity is ``always looking at how we reward our talent and doing our best to keep everybody that we can.'' |
