Reuters is taking a run at Fidelity, reporting that the mutual fund colossus is experiencing serious outflows from its “flagship” retirement funds in the face of amped-up equity exposure.
Citing Morningstar research, the news service notes the Boston-based investment giant has outperformed 85 percent of its peers over the last three years.
The solid returns aren’t enough to stem the bleeding, however, with a steady stream of investor exits over a corresponding period. Fidelity hired a top “asset allocation” executive away from AllianceBernstein in early February with the specific task of reversing flow.
It’s made more interesting given Fidelity’s corporate performance overall. The Wall Street Journal pegs firm revenue at $18.2 billion, with $5.3 billion in operating income, a 54 percent year-over-year increase.
Assets under administration rose to a ridiculous (and record) $6.8 trillion, while assets under management rose to $2.45 trillion.
It all comes amid the Massachusetts mainstay’s own #MeToo moment, which could potentially affect performance now that Fidelity is considering radical revamps to its investment process in the wake of sexual harassment scandal.
The paper reports the changes now considered come after a comprehensive review by outside counsel of its famed “stock-picking unit,” something for which the firm is known.
Fidelity fired one of its most prominent fund managers, Gavin Baker, in October for allegedly sexually harassing a junior female employee, and several other portfolio managers were forced out following similar complaints of alleged sexual harassment and other abusive behavior.
“Former and current Fidelity employees said two main issues have contributed to incidents of bad behavior inside the money-management unit. One is the existing compensation system, in which managers vote on analysts’ performance, which in turn affects those individuals’ pay,” the Journal writes.
The power disparity has fueled inappropriate workplace behavior, they said, encouraging a popularity contest-like atmosphere, “where junior analysts have felt pressure to curry favor with managers and have feared a backlash for disagreeing with their investment ideas.”
It’s another reminder that if headline risk can fell a fund giant like Fidelity (or at least cause serious issues, PR and otherwise), no one is immune.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
