Fidelity Profit Hits Record Even as Assets Fall In Tough Market

(Bloomberg) -- Fidelity Investments posted record revenue and operating income in 2018 even as assets under management fell for the first time in seven years.

The mutual fund giant reported outflows from its actively managed stock funds -- once its most well-known business -- while seeing gains in its index products, according to the closely held company’s annual report released Thursday.

Key Takeaways

  • Chief Executive Officer Abigail Johnson noted the impact that the rough markets had on the company. “For the first time since 2011, the stock and bond markets did not boost the levels of Fidelity’s managed and administered assets,” she said in the report.
  • Assets under management last year were $2.4 trillion, down 1 percent from 2017.
  • Fidelity, Charles Schwab Corp. and Vanguard Group Inc. are dueling to win investors by offering commission-free ETFs and slashing fees on other funds. Fidelity’s new zero-fee funds, first introduced in August, had net asset flows of $2.9 billion through the end of 2018.
  • “When I look at today’s financial services landscape compared with 30 years ago, the number of investment products and services available to individuals at very low cost, or no cost, is extraordinary,” Johnson said.

Digging Deeper

  • Fidelity’s actively managed equity products saw net redemptions of $53.2 billion.
  • Revenue rose 12 percent to a record $20.4 billion.
  • Operating income advanced 19 percent to a record $6.3 billion.
  • Fidelity’s mutual funds beat 66 percent, 72 percent, and 76 percent of peers for the trailing one-, three-, and five-year periods, respectively. This compares with 78 percent, 77 percent, and 76 percent for the same periods in 2017.

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