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Fidelity Investments Reports Strong Profit

March 09, 2001|Reuters, Bloomberg News

Fidelity Investments, the world's largest mutual fund company, said Thursday its profit more than doubled to $2.17 billion in 2000 as strong performances at its fund supermarket and brokerage arms offset weak sales of Fidelity funds and the effect of the stock market's decline.

In its annual report, privately owned Fidelity said revenue for the year was $11.1 billion, compared with $8.85 billion in 1999, even though assets under management at year-end totaled $919.8 billion, down from $955.1 billion a year earlier.

In 1999 Fidelity's net profit totaled $1.01 billion.

In the company's annual report, Chairman and Chief Executive Edward Johnson highlighted the increasing diversification of Fidelity, once a focused mutual fund firm but increasingly a diversified financial services company.

"About half of our operating revenues and approximately a third of our operating income came from non-investment-management areas of our company, demonstrating again the importance of developing businesses that are not totally dependent on management fees" from funds, Johnson wrote.

Gains in those non-fund areas--such as brokerage, retirement-plan management and outsourcing services such as payroll and benefits administration--helped to offset a 74% plunge in net sales of Fidelity funds.

While profit was up, 2000 marked the second year in a row the company's mutual funds posted middling returns relative to many rivals. In aggregate, Fidelity funds beat 57% of their competitors on an asset-weighted basis, the same as in 1999.

Although performance for the year was arguably mediocre, examined over three years fund returns were better: Over the last 36 months Fidelity's funds beat 67% of their peers, in aggregate.

"They avoided the all-out disasters that someone like Janus had" with highly valued growth stocks last year, said Eric Kobren, who edits a newsletter on Fidelity funds.

"I hate to say that mediocrity is OK, but Fidelity has certainly tried to protect themselves over the past five years by not having major mistakes, not having things blow up," Kobren added.

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