Fidelity led in '08 fund withdrawals

Fidelity Investments, Franklin Resources Inc., and Legg Mason Inc. suffered the biggest US mutual-fund withdrawals in 2008, according to Morningstar Inc.

Investors pulled $40 billion from stock and bond funds at Boston-based Fidelity, the biggest outflow from a single company. They took $21.5 billion from Franklin and $21 billion from Legg Mason. Together, the three companies accounted for 43 percent of the record $194 billion in withdrawals last year.

The worst equity markets in seven decades and investor redemptions drove a 35 percent decline in stock and bond fund assets, to $5.13 trillion.

Falling asset levels have cut into fee income at money-management companies, leading to the elimination of more than 4,800 jobs at the firms. Fidelity is cutting 3,000 jobs, or 7 percent of its workforce, while Legg Mason said it plans 200 cuts, or 8 percent. Franklin cut 167 jobs, or about 2 percent.

As investors headed into 2009, they abandoned actively managed stock funds and turned to bond funds, primarily those offered by Vanguard Group and Pacific Investment Management Co.

US and international stock funds had $189.2 billion in withdrawals, according to Morningstar, amid the biggest equity market losses since the Great Depression.

Among the funds with investment losses were Fidelity Contrafund, whose 37 percent decline matched the Standard & Poor's 500 Index. Legg Mason Value Trust fell 55 percent in 2008, its worst year ever.