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Fidelity Investments

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Fidelity Investments, formerly known as Fidelity Management & Research (FMR), is an American multinational financial services corporation based in Boston, Massachusetts. Established in 1946, the company is one of the largest asset managers in the world, with $5.8 trillion in assets under management, and $15.0 trillion in assets under administration, as of September 2024, [4] Fidelity Investments operates a brokerage firm, manages a large family of mutual funds, provides fund distribution and investment advice, retirement services, index funds, wealth management, securities execution and clearance, asset custody, and life insurance.[5]

Fidelity Investments
FormerlyFidelity Management and Research Company
Company typePrivate
IndustryFinancial services
Founded1946; 78 years ago (1946) (as Fidelity Management & Research)
FounderEdward C. Johnson II
Headquarters245 Summer Street
Boston, Massachusetts,
U.S.
Area served
Worldwide
Key people
Products
Services
RevenueIncrease US$28.2 billion (2023)[2]
Increase US$8.5 billion (2023)[2]
AUMIncrease US$12.6 trillion (2023)[2]
Owner Abigail Johnson and family (49%)
Current and former employees (51%)
Number of employees
74,000 (2023)[3]
Websitewww.fidelity.com

History

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The "Fidelity Fund" became Fidelity Investments under Edward C. Johnson II; incorporated in Massachusetts, May 1, 1930. During the Great Depression, the "Fidelity Fund" was the only fund approved by John C. Hull in his term in office as Securities Director for Massachusetts because of widespread bank failures in 1930.[6] The corporate structure changed in 1946 and became known as Fidelity Management & Research (FMR).[1]

In 1969, the company formed Fidelity International Limited (FIL) to serve non-U.S. markets and subsequently spun it off in 1980 into an independent entity owned by its employees.[7]

In 1982, FMR company started offering 401(k) products.[1] In 1984, it offered computerized stock trading.[1]

In 1997, Robert Pozen was named CEO.[8]

In 2001, Geode Capital Management was established to run and incubate investment strategies for FMR. In 2003, it was spun off as an independent company.[9]

In 2003, the company launched its first ETF, called the Fidelity Nasdaq Composite Index Tracking Stock Fund (ONEQ).[10]

In 2010, Fidelity Ventures, its venture capital arm, was shut down, and many of the employees created Volition Capital. [11]

In 2011, Fidelity changed the name of its international division from Fidelity International to Fidelity Worldwide Investment and a new logo was introduced.[12]

In 2012, the company moved its Boston headquarters to 245 Summer Street.[13]

In 2014, Abigail Johnson became president and CEO of Fidelity Investments (FMR) and chairman of Fidelity International (FIL).[14]

In 2018, Fidelity launched a separate entity dedicated to institutional cryptoasset custody and cryptocurrency trading.[15]

In May 2019, it was reported that the firm would soon be offering cryptocurrency trading to institutional customers.[16]

In October 2019, the company launched Fidelity Digital Asset Services, which will handle cryptocurrency custody and trade execution for institutional investors.[17][18] Subsequently, in March 2021, Fidelity filed for introducing a Bitcoin ETF with the SEC.[19]

Fidelity's assets under management climbed 26% in 2019 to a record $3.2 trillion, which helped boost revenue to $20.9 billion and operating income to $6.9 billion.[20]

At the end of January 2020, Fidelity launched "Stocks By The Slice", a program aimed at investors wishing to capitalize on fractional-share ownership and micro-investing. Micro-investing is a type of investment strategy that is designed to make investing regular, accessible and affordable, especially for those who may not have a lot of money to invest or who are new to investing.[21][22]

In March 2020, Fidelity opened a new investor center in Chesnut Hill, MA.[23]

In March 2021, FMR's operating income rose 4.6%.[24] In August 2021, Fidelity announced plans to hire 16,000 employees in 2021,[25] including 9,000 during the second half of the year.[26]

In April 2022, Fidelity Investments announced that it will start offering Bitcoin as an investment option, specifically in its 401(k) plans by the middle of the year. It is also the first major 401(k) provider to offer cryptocurrency as an investment for retirement savers, according to CNN. However, this option will only be offered to participants whose employers have elected to include it in their plan, as of now.[27]

In June 2023, Fidelity applied with the United States Securities and Exchange Commission (SEC) to launch a Spot Bitcoin exchange-traded fund (ETF). In November 2023, they filed another application with the SEC to launch a Spot Ethereum ETF.[28][29] The Bitcoin fund was granted approval and launched on January 11, 2024.[30]

Current operations

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Mutual funds

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FMR has three fund divisions: Equity (headquartered in Boston, Massachusetts), High-Income (headquartered in Boston) and Fixed-Income (headquartered in Merrimack, New Hampshire). The company's largest equity mutual fund is Fidelity Contrafund, which has $107.4 billion in assets,[31] making it the largest non-indexed fund in the U.S. and the largest fund managed by an individual. William Danoff has managed Contrafund since 1990.[32]

Fidelity Magellan is another large equity fund, with $15.5 billion in assets.[33] Its current manager is Jeffrey Feingold, who also manages the Fidelity Trend Fund. Founded by Ned Johnson in 1963 as the Fidelity International Fund during what Peter Lynch called the "great fund boom", it was renamed the Magellan Fund in 1965. As Lynch recounted, the early sales staff of the Magellan Fund was mostly part-time, traveling employees until the 1973–1974 stock market crash led to a severe decline in interest.[34]

Magellan was managed by Johnson from May 2, 1963, to Dec. 31, 1971, Lynch from May 31, 1977, to May 31, 1990, and Harry W. Lange from 2005 to 2012. Under Lynch's leadership Magellan averaged 29% a year, more than doubling the growth rate of the benchmark S&P 500, and remains the best-performing mutual fund in history over such an extended period.[35][36]

In 2018, Fidelity Investments introduced a new line of zero-expense-ratio mutual funds[37] for individual investors. Fidelity's first two zero expense ratio funds, ZERO Total Market Index Fund and ZERO International Index Fund have since grown to more than $1 billion in assets. Later that year, Fidelity introduced two more zero-expense funds. Together, the four Fidelity zero-expense-ratio equity funds[38] provide market exposure to more than two-thirds of industry index assets.

Brokerage

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Fidelity Investments operates a major brokerage firm and has investor centers in over 140 locations throughout the U.S. Through its subsidiary, National Financial Services LLC, Fidelity Investments provides services to its correspondent broker-dealers, institutional investment firms, banks and trusts, family offices,[39] and registered investment advisors including brokerage clearing and back office support and a suite of software products for financial services firms. National Financial was the custodian for over $443 billion in assets, in 4.3 million accounts as of September 30, 2010. By 2023 the firm had over 45 million brokerage accounts with over $4.5 Trillion in AUM and nearly $12 Trillion in AUA.[39][better source needed]

Benefits outsourcing

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Fidelity Personal, Workplace and Institutional Services (PWIS) is the largest provider of 401(k) retirement plan services with $1.4 trillion under administration[40] and $32 billion in total defined contribution assets, as of 2015.[40] Other services provided include pension administration, health & welfare administration, stock plan administration as well as payroll and other record-keeping services.

Devonshire Investors

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The company's Devonshire Investors arm is a division that gives the owners of the company the ability to make other investments outside its funds.[41]

Assets include Veritude, an employment agency for jobs at Fidelity.[42] The company has been a major investor of real estate, owning the Seaport Center and 2.5 million square feet of office space in Boston.[43] It formerly owned Community Newspaper Company, the largest chain of newspapers in suburban Boston, Massachusetts, sold to the Boston Herald in 2000[44] and now owned by GateHouse Media. Fidelity has also strategically invested in the telecom/managed services/data center industries, including COLT Telecom Group in Europe,[45] MetroRED in South America, and KVH Co. Ltd. in Japan. Since 2008, all MetroRED ownership has been completely divested.

It was formerly heavily invested in commercial lumber and building materials.[46]

In 2013, they sold Boston Coach, a limousine and black-car service, founded in 1985 by Ned Johnson after waiting too long for a taxi, to Harrison Global.[47] It formed ProBuild in 2006 and sold it to Builders FirstSource in 2015.[48]

Donor-advised fund

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Fidelity manages a Donor-Advised Fund (DAF), Fidelity Charitable, in 1991, becoming the first commercial DAF provider.

Eight Roads

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Fidelity International (FIL) also runs its own proprietary investing arm called Eight Roads. It is a global platform with 100+ investment professionals across China, Japan, India, Singapore and the UK.[citation needed] In 2018, Eight Roads launched a new European fund.[49] In June 2019, Fidelity announced it may demerge Eight Roads from its core business.[50]

Investigation about insiders' private investments

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A private venture capital firm, F-Prime Capital Partners, managed on behalf of owners and other key leaders of Fidelity Investments, has been described as directly competing with Fidelity Investments public funds. A 2016 Reuters investigation identified multiple cases where F-Prime Capital Partners [51] was able to make investments at a fraction of the price of Fidelity Investments. Because of SEC regulations, investments by F-Prime Capital Partners preclude Fidelity from making the same early investments. The investigation describes that this competition forces Fidelity to delay investing until later and at much higher prices than F-Prime Capital Partners, resulting in lower returns for Fidelity fund shareholders.[51][52]

Corporate governance experts have stated that the practice is not illegal, but that it poses a clear corporate conflict of interest.[51] Fidelity spokesmen have stated that they are following all laws and regulations.[51][53]

The same Reuters investigation documents six cases (out of 10) where Fidelity Investments became one of the largest investors of F-Prime Capital companies after the start-up companies became publicly traded. Legal and academic experts said that major investments by Fidelity mutual funds - with their market-moving buying power - could be seen as propping up the values of the F-Prime Capital investments, to the benefit of Fidelity insiders.[51]

Fidelity declined to comment on this aspect of the investigation.[53][51]

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Document retention fines

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In February 2007, the NASD, a division of the Financial Industry Regulatory Authority, fined four FMR-affiliated broker-dealers $3.75 million for alleged registration, supervision and e-mail retention violations. The broker-dealers settled without admitting or denying the charges.[54]

In 2004, Fidelity Brokerage paid $2 million to settle charges by the U.S. Securities and Exchange Commission that employees altered and destroyed documents in 21 of its 88 branch offices between January 2001 and July 2002. Fidelity has internal inspections every year to make sure it is complying with federal regulations. Management was accused of pressuring branch employees to have perfect inspections and gave notice of the inspections and that at least 62 employees destroyed or altered potentially improper documents maintained at branch offices including new account applications, letters of authorization and variable annuity forms.[55]

Misrepresentations

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In May 2007, NASD fined two Fidelity broker-dealers $400,000 for preparing and distributing misleading sales literature promoting Fidelity's Destiny I and II Systematic Investment Plans, which were sold primarily to U.S. military personnel. As part of the settlement, the FMR affiliates were required to notify Destiny Plan holders who want to increase their investments in existing Destiny Plans that additional shares of the underlying fund can be purchased outside the Destiny Plans without paying the additional sales charges.[56]

Ownership and management

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Johnson Family

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The founding Johnson family, individually and through various trusts, owns stock representing a 49% voting interest in FMR, and have signed agreements pledging to vote all their shares as a bloc. Edward Johnson III was chairman of the group, but was replaced by his daughter, Abigail Johnson. Abigail was once the largest single shareholder with about 25% ownership, but in October 2005, it was reported that she had sold a "significant" portion of her shares to family trusts, and that there were doubts as to whether she was still in line to succeed her father.[57] Abigail was named CEO in 2014,[58] and chairman in 2016.[59]

Employees and ex-employees

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Most of the remaining 51% of the company is held by various Fidelity employees and ex-employees, including fund managers and ex-managers, such as Peter Lynch.[60]

Offices

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FMR's corporate headquarters are in Boston, Massachusetts, with the largest U.S. operations located in Merrimack, New Hampshire; Smithfield, Rhode Island; Westlake, Texas; Dallas, Texas; Houston, Texas; San Antonio, Texas; Mission Hills, Kansas; Covington, Kentucky; Durham, North Carolina; Albuquerque, New Mexico; Cincinnati, Ohio; Salt Lake City, Utah; Jacksonville, Florida; Greenwood Village, Colorado; and American Fork, Utah. It also has offices in Canada in Toronto, Montreal, Calgary and Vancouver. Fidelity Management and Research in 2009 opened offices in both Hong Kong and Tokyo, Japan to add capabilities to its small cap research.

In 2004, Fidelity established its first presence in India by opening an office in Mumbai. However, their offices in India mostly serve back-office function and do not make any investments-related decisions.[1] The company has over 4,000 employees in India. Its second largest software development facility (after the United States) is in Bangalore and Chennai.

Fidelity Investments Ireland was established in 1996 as the European offshore development centre for Fidelity Investments and now employs over 1,000 people with offices in Dublin and Galway. Fidelity also has offices in France, Germany, Belgium, Italy, Spain and Switzerland and London for its HR Solution business HR Access.

Marketing

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Paul McCartney marketing campaign

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Fidelity has experimented with marketing techniques directed to the baby boomer demographic, releasing Never Stop Doing What You Love, a compilation of songs by Paul McCartney. McCartney became the firm's spokesman in 2005 in a campaign entitled "This Is Paul". On the day of the disc's release, company employees were treated to a special recorded message by Paul himself informing them that "Fidelity and [he] have a lot in common" and urging them to "never stop doing what you love".[61]

See also

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References

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  1. ^ a b c d e "Our Heritage – Fidelity". www.fidelity.com.
  2. ^ a b c "2023 Annual Report". Fidelity. Retrieved March 23, 2024.
  3. ^ Brush, Silla (March 8, 2024). "Fidelity Cuts About 700 Jobs, Its First Reduction Since 2017". Bloomberg News. Archived from the original on March 8, 2024.
  4. ^ "About Fidelity - Our Company". www.fidelity.com. Retrieved March 23, 2024.
  5. ^ "Fidelity Investment About". December 31, 2017. Archived from the original on May 26, 2020. Retrieved March 13, 2018.
  6. ^ Moody's Manual of Investments, American and Foreign: Banks, insurance companies, investment trusts, real estate, finance and credit companies Jan 1944 Moody's Investors Service, pg. 754; FIDELITY FUND, INC. Incorporated in Massachusetts May 1, 1930. as an investment trust of the general man agement type. Officers: E. C. Johnson, 2d., Pres., E. C. Johnson, 2nd — Vice-Pres. & Treas.)
  7. ^ Newton, Gill (February 16, 2017). "Fidelity Worldwide Investment is going its own way in America". IR Magazine.
  8. ^ GILPIN, KENNETH N. (April 22, 1997). "2 Executives Get New Posts At Fidelity". The New York Times.
  9. ^ "Fidelity Splits Off Geode Capital as Separate Manager (Update1)". February 9, 2006. Archived from the original on February 9, 2006.
  10. ^ "Fidelity Launches First ETF". ETF.com. January 1, 2004.
  11. ^ Moore, Galen (January 11, 2010). "Fidelity's venture capital arm breaks off". Boston Business Journal.
  12. ^ Pearce, Andrew (June 2, 2015). "Fidelity Worldwide Investment COO exits". FN London.
  13. ^ Healy, Beth (November 16, 2012). "Fidelity plans to move Boston headquarters". Boston Globe.
  14. ^ O'Donnell, Carl. "Abigail Johnson Replaces Father Edward As CEO Of Fidelity". Forbes. Retrieved May 20, 2019.
  15. ^ "Fidelity (Full Data File)". Business of Crypto. October 16, 2018. Retrieved October 16, 2018.
  16. ^ Fitzgerald, Maggie (May 6, 2019). "Fidelity is reportedly about to offer cryptocurrency trading for pros within a few weeks". www.cnbc.com. Retrieved May 7, 2019.
  17. ^ "Fidelity Launches Inaugural Bitcoin Fund for Wealthy Investors". Bloomberg.com. August 26, 2020. Retrieved September 3, 2020.
  18. ^ Rooney, Kate (October 15, 2018). "Fidelity just made it easier for hedge funds and other pros to invest in cryptocurrencies". CNBC. Retrieved September 3, 2020.
  19. ^ 'Bloomberg' Leising, Matthew (March 24, 2021). "Fidelity Applies for Bitcoin ETF With U.S. Securities Regulator". CNBC. Retrieved March 24, 2021.
  20. ^ "Most Powerful Women in Finance: Abigail Johnson, Fidelity Investments". American Banker. September 29, 2020. Retrieved October 8, 2020.
  21. ^ "The Innovators – Meet the 65 Companies and Their Owners Who Have Conjured Up the Latest Wave of Products, Services, and Technologies". money.cnn.com. May 1, 2001. Retrieved April 20, 2023.
  22. ^ Lucchetti, Aaron (December 22, 1999). "E-Tailers Allow Buyers to Add Fund Investments to Carts". Wall Street Journal. Retrieved April 20, 2023.
  23. ^ Leary, K. H. (March 3, 2020). "New Fidelity Investments® Investor Center at Chestnut Hill Square". Patch Media. Retrieved March 26, 2020.
  24. ^ Krauskopf, Lewis (March 2, 2021). "Fidelity parent posts 4.6% rise in operating income". Reuters. Retrieved September 6, 2021.
  25. ^ Edelman, Larry. "Fidelity Investments boosts hiring target to 16,000 for the year - The Boston Globe". BostonGlobe.com. Retrieved September 6, 2021.
  26. ^ Baer, Justin (August 31, 2021). "WSJ News Exclusive | Fidelity Wants to Add 9,000 Jobs by Year-End". The Wall Street Journal. ISSN 0099-9660. Retrieved September 6, 2021.
  27. ^ Jeanne Sahadi (April 26, 2022). "Fidelity will soon offer bitcoin as an option in 401(k)s". CNN. Retrieved May 8, 2022.
  28. ^ Timmy Shen (June 27, 2023). "Bitcoin, other top 10 cryptos rise; Fidelity said to plan spot Bitcoin ETF application in U.S." Yahoo Finance. Retrieved December 7, 2023.
  29. ^ Leo Kostas (November 30, 2023). "Preparing For The First Spot Bitcoin ETF - A Guide For Investors". Benzinga. Retrieved December 7, 2023.
  30. ^ Fidelity Newsroom. (10 January 2024). "Press release:Fidelity Investments® Launches Spot Bitcoin Exchange-Traded Product, Fidelity® Wise Origin® Bitcoin Fund (FBTC)" Fidelity website Retrieved 22 February 2024.
  31. ^ "Fidelity® Contrafund® Fund". The New York Times Markets.
  32. ^ "Everything You Need to Know About The Fidelity Contrafund Mutual Fund". CNN Money.
  33. ^ "Fidelity® Magellan® Fund". The New York Times Markets. Archived from the original on October 19, 2017.
  34. ^ Lynch, Peter (1994) [1993]. Beating the Street (Revised ed.). New York: Simon & Schuster Paperbacks. pp. 83-84. ISBN 978-0-671-89163-3.
  35. ^ The Intelligent Investor, 2003, Commentary on the Introduction
  36. ^ "AJCU: Peter Lynch". AJCU. Archived from the original on December 26, 2014. Retrieved October 15, 2013.
  37. ^ Editorial Staff. "Fidelity Launches Two More Zero-Expense Funds". Retirement Income Journal. Retrieved January 19, 2022.
  38. ^ "Fidelity ZERO Fee Funds: Here Are the Pros and Cons". UseFidelity. January 18, 2022. Retrieved January 19, 2022.
  39. ^ a b National Financial web site, About Us
  40. ^ a b Wang, Andrew (November 16, 2015). "401K Providers: 2015 Top 20 Lists".
  41. ^ Leung, Shirley (August 9, 2013). "A heavy loss in Fidelity's pursuit of the perfect tomato". Boston Globe.
  42. ^ "Temporary jobs Fidelity Investments - Veritude". www.veritudejobs.com.
  43. ^ DIESENHOUSE, SUSAN (April 9, 2000). "Fidelity: A Major Investor in Real Estate, Too". The New York Times.
  44. ^ BARRINGER, FELICITY (September 29, 2000). "THE MEDIA BUSINESS; Fidelity Sells Newspapers To Boston Herald Owner". The New York Times.
  45. ^ Kunert, Paul (August 12, 2015). "Colt shareholders grab Fidelity offer, declare 'we're outta here'". The Register.
  46. ^ "Fidelity's ProBuild investment stumbles -- filing". Reuters. November 5, 2009.
  47. ^ "Fidelity selling BostonCoach limousine group, launched in 1985 by chairman Ned Johnson - The Boston Globe". The Boston Globe.
  48. ^ "Builders FirstSource Completes Acquisition of ProBuild" (Press release). Globe Newswire. July 31, 2015. Archived from the original on October 19, 2017. Retrieved January 7, 2017.
  49. ^ "Eight Roads Ventures launches new $375M scale-up fund for European and Israeli startups". TechCrunch. March 20, 2018. Archived from the original on February 20, 2020. Retrieved October 3, 2019.
  50. ^ "Fidelity considering demerger of venture arm Eight Roads". The Business Times. June 17, 2019. Retrieved October 3, 2019.
  51. ^ a b c d e f "How the owners of Fidelity get richer at everyday investors' expense". Reuters. October 5, 2016. Retrieved February 8, 2018.
  52. ^ "One of Mutual Fund Company Fidelity's Star Managers Made Millions off Alibaba's IPO". Fortune. Retrieved February 8, 2018.
  53. ^ a b "After Fidelity Investments and its owners get blasted by Reuters for alleged high-level conflicts of interest, Morningstar accepts the Boston-based giant's explanation". RIABiz. Retrieved February 8, 2018.
  54. ^ "NASD Fines Four Fidelity-Affiliated Broker-Dealers $3.75 Million for Registration, Supervision and Email Retention Violations" (Press release). Financial Industry Regulatory Authority. February 5, 2007.[permanent dead link‍]
  55. ^ "SEC and NYSE File Settled Action Charging Fidelity Brokerage Services for Violating Federal Securities Laws and NYSE Rules in Connection with Document Alteration and Destruction" (Press release). U.S. Securities and Exchange Commission. August 3, 2004.
  56. ^ "NASD Fines Two Fidelity Broker Dealers $400,000 for Distributing Misleading Sales Literature About Systematic Investment Plans Sold to Military Personnel" (Press release). Financial Industry Regulatory Authority. May 8, 2007.
  57. ^ "Johnson still Fidelity successor?". CNN. October 28, 2005.
  58. ^ Grind, Kirsten (October 13, 2014). "Abigail Johnson Named CEO of Fidelity Investments". Wall Street Journal. Retrieved February 12, 2022.
  59. ^ "Abigail Johnson". Forbes. Retrieved February 12, 2022.
  60. ^ Fidelity Investments (March 18, 2013). "Activities and Management of FMR. Proxy statement, special meeting of shareholders of Fidelity Advisor Series VII Fidelity Select Portfolios to be held on May 14, 2013. p. 20.
  61. ^ Abelson, Jenn (September 8, 2005). "Brand on the run: Struggling Fidelity turns to ex-Beatle to lure boomers". Boston Globe.
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