Fidelity posts records on revenues, profit in 2014
Mutual fund giant Fidelity Investments said its revenue and operating profit rose to record highs in 2014, a year of strong financial markets.
Fidelity’s operating income jumped 29 percent to $3.4 billion, the company said. Revenues rose 9 percent to $14.9 billion.
The Boston-based investment firm’s annual report cited intense competitive pressures in the industry, even as Fidelity reported record assets under management of $2.03 trillion, up 4 percent from 2013.
For the first time, the Fidelity report’s opening letter was jointly penned by chairman Edward C. “Ned” Johnson 3d and his daughter, Abigail P. Johnson, who was elevated to chief executive last year.
The Johnsons acknowledge that actively managed mutual funds — Fidelity’s specialty for decades — “faced stiff competition from the recent preference of investors for passive products,’’ such as index funds and exchange-traded funds.
Despite an overall increase in assets, Fidelity said investors pulled $16 billion from its actively managed stock funds in 2014.
Actively managed funds adjust their portfolios on a day-to-day basis, buying and selling investments.
Passive funds charge lower fees and stick to a set lineup of investments, usually copying an index such as the Standard & Poor’s 500.
Fidelity said its mutual funds outperformed two-thirds of their peers, meeting its goal. John Bonnanzio, editor of the Wellesley-based independent advisory newsletter Fidelity Insight, said the money manager’s 2014 performance was steady but not an improvement.
“There was really no improvement year over year,’’ he said. “It’s mostly important that we see Fidelity’s equity funds beat their benchmarks and their peers. And that was definitely a mixed bag last year.”
Fidelity’s stock funds outperformed 69 percent of their peers in 2014 and bested three-quarters of them during the past three years, an improvement over recent results, according to the report.
Counting all types of Fidelity mutual funds, they beat 66 percent of their peers in 2014, 70 percent during the three years ended Dec. 31, and 68 percent over five years.
Fidelity has taken steps in the past year-and-a-half to launch products to compete with investments that charge lower fees than actively managed funds. Ten passive exchange-traded funds rolled out by the firm in October 2013 have brought in $2 billion , Fidelity said. More recently, the company introduced three actively managed ETFs.
Even as Fidelity continues to add digital bells and whistles for its customers who trade and do other business online, it also invested in human interactions. It hosted 3,000 investor seminars in its offices.
The firm continues to add services for wealthy customers, including opening a West Coast location for its Family Office business, serving high net-worth investors in Silicon Valley.
The firm said its managed account offerings, for wealthier investors, “were a bright spot,’’ with assets from individuals increasing 18 percent to $177.6 billion.
In their letter, the Johnsons said Fidelity began to see payoffs last year on “substantial investments to enhance operational quality, reduce unit costs, and build new online tools and capabilities for customers.”
They also said, “Going forward, we must balance our investments and growth efforts against the competitive and pricing challenges that many of our businesses face.”
Assets under administration at Fidelity, which manages the retirement nest eggs of 25 million Americans, increased 10 percent, to $5.06 trillion, the company said.