Fidelity Investments, the biggest US-based fund group, may announce job cuts in the weeks ahead, as the longest bear market since the 1970s squeezes profits in its mutual fund business, analysts said.
Fidelity saw US$4.1 billion leave its stock and bond mutual funds in September, putting its long-term assets on pace to end the year at their lowest level since 1997, according to Financial Research Corp, Fidelity's workforce, which totaled 28,700 in 1998, has grown to about 32,500 today.
"It's amazing Fidelity has been able to withstand any measurable layoffs this long," said Jim Lowell, editor of Fidelity Investor, a monthly newsletter based in Needham, Massachusetts. Lowell said Fidelity competitors Janus Capital Corp and Putnam Investments have already cut hundreds of jobs.
Fidelity's stock and bond fund assets fell 27 percent in the year through September as the Standard & Poor's 500 Index lost more than a quarter of its value. While assets at most fund companies have dropped, Fidelity has garnered less in new sales than rivals like Vanguard Group, which has gained as investors have shifted billions from stocks to bonds.
Vanguard, the largest seller of bond funds, has taken in US$26.2 billion in new cash this year through September, more than five times the US$5.2 billion received by Fidelity, according to FRC. If money market funds are included, Fidelity said it has taken in US$31.5 billion this year through September, compared with US$11.5 billion in all of 2000.
Fidelity spokeswoman Anne Crowley said the Boston-based company has no plans for company-wide job reductions. She said each Fidelity business unit makes its own staffing decisions.
"There is no cross-company directive to do across-the- board-layoffs," Crowley said. "Our business units are given significant autonomy in both good markets and bad to make their decisions in how best to run their business."
To be sure, Fidelity is more than mutual funds. It's the US' largest manager and administrator of 401(k) plans, has a brokerage business and a unit that manages companies' benefit plans and services such as payrolls. As of Sept. 30, it had total assets of US$813.1 billion.
Still, mutual funds accounted for 50 percent of Fidelity's US$11.1 billion in revenue and two-thirds of its US$2.17 billion in pretax profit last year. Fidelity is privately held by Chairman Edward "Ned" Johnson III and his family.
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