Next Score View the next score

    Fidelity posts strong earnings in 2013

    A Fidelity Investments office in Boston.
    AP File/2008
    A Fidelity Investments office in Boston.

    Strong markets helped boost Fidelity Investments’s operating profit 13 percent last year, as the mutual funds and retirement accounts the firm manages for clients both grew to record levels.

    Fidelity, one of the state’s most profitable companies, said operating earnings posted by its funds, brokerage, and other businesses rose to $2.6 billion in 2013.

    Overall, it was another year of recovery for the Boston-based investment giant and the industry in general. The financial crisis had not only hurt the bottom line but also put a dent in customers’ appetite for stock funds. Fidelity chairman Edward C. “Ned” Johnson III said in the company’s annual report Wednesday that the bull market sending stocks up 32 percent last year was like a replay of 2012, “only better.’’


    Not given to overly sunny reviews of his firm’s business, Johnson nevertheless said in his annual letter that “investors had a lot to feel good about’’ in 2013. And Fidelity benefited, as company revenues climbed 8 percent to $13.6 billion. Total customer assets under administration rose 19 percent to $4.6 trillion.

    Get Talking Points in your inbox:
    An afternoon recap of the day’s most important business news, delivered weekdays.
    Thank you for signing up! Sign up for more newsletters here

    Fidelity increasingly brings in new customers not by selling the hottest mutual fund on the street but by having a massive reach with its products, from packages of funds aimed at specific retirement dates for workers to brokerage services for hedge funds.

    That diversification was good for Fidelity last year because even the soaring stock market failed to drive new customer cash directly into its stock funds. Equity funds sold directly to investors saw outflows of $7.8 billion, an improvement from the $32.4 billion withdrawn in 2012.

    However, those same funds benefitted indirectly from the popularity of Fidelity’s target-date retirement accounts and other similar strategies. The target-date accounts redistribute investor money into a portfolio of other Fidelity stock and bond funds. Those strategies brought in $9.2 billion to the firm last year.

    John Bonnanzio, editor of the Fidelity Insight investor newsletter, said the positive markets were generally a wind at Fidelity’s back last year.


    “When the market goes up, the all-important equity funds are going to have a good year,’’ Bonnanzio said. “That means more assets and it means more income.’’

    In a bad year for bonds, Fidelity’s investment-grade bond funds improved relative to their peers. High-income funds, however, were in the middle of the pack, outperforming fewer competitors than in 2012.

    In the Fidelity report, Johnson acknowledged the ascendance of his daughter Abigail at the firm, saying she assumed an “expanded leadership role as president’’ in September. The elder Johnson called this a “natural progression for Abby, who over the past 25 years has taken on increasingly more challenging roles overseeing virtually every aspect of Fidelity’s operations.’’

    Looking forward, he said, “I have complete confidence she will continue to serve our customers and our firm exceedingly well in the future.’’ Ronald O’Hanley, who had held the number three position at the firm under Abigail Johnson, recently announced his departure.

    Meanwhile, Abigail Johnson introduced some of her own priorities in the report, which serves as a yearly window on the privately held firm’s performance and the thinking of the billionaire father and daughter who run the company.


    She noted that the firm is looking to engage more with women in the future, as they become bigger investors.

    “Across the board, women are unhappy with our industry,’’ Johnson said. While some lack confidence in investing, many are “becoming increasingly powerful in our economy,’’ accumulating wealth and out-earning their spouses.

    Edward Johnson said Fidelity “is likely to face a host of challenges in 2014,’’ citing “aggressive competitors,’’ volatile markets, and unpredictable political and regulatory environments.

    At times, Fidelity has fostered a ruthless corporate culture among executives and shifted offices to less costly sites in New Hampshire and Rhode Island that were not always convenient for employees.

    But Abigail Johnson emphasized Fidelity’s interest in providing a good experience for its associates.

    She said she wants people to be able to move up, “but also around,’’ to gain diverse experiences and develop professionally. That’s key, she said, to maintaining “a consistent culture across the business. This will always be an important priority for me.’’

    Beth Healy can be reached at

    Corrections: An earlier version of this story misstated the historical significance of the earnings.