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Fidelity is hiring while laying off 3,000

Boston mutual fund giant sees analysts as way to better results

By Ross Kerber
Globe Staff / March 21, 2009
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Boston financial giant Fidelity Investments is adding as it subtracts.

The mutual fund company, in the midst of laying off at least 3,000 employees including analysts at its investment unit, is also hiring. The company is adding new analysts and other investment professionals, and says it plans to expand research offices in Hong Kong and Tokyo this year.

While many companies retrench during a recession, Fidelity's moves show how some businesses do more than just hunker down and wait out a downturn; even though the stock market collapse has hit everyone in the investment world, specialists who follow the company say Fidelity is trying to move forward with new blood to improve its stock-picking after many of its mutual funds turned in grim performances in 2008.

One way has been to lay off 46 people, including 22 research analysts, at Fidelity's core FMR Co. mutual funds unit, according to an internal company document reviewed by the Globe.

These are the deepest cuts in memory at the unit that runs Fidelity's well-known funds like Contrafund and Magellan.

A spokeswoman declined to comment on the memo, which lists by job title and age the number of people let go from FMR. Also among the 46 laid off were 11 traders.

Other changes in the unit include the retirement of Dwight Churchill, who ran its bond operations. Just yesterday Fidelity named as Churchill's replacement Christopher Sullivan, previously co-head of the bond group at Goldman Sachs Asset Management.

In past layoffs Fidelity had left alone staff at FMR. But that didn't save funds like Magellan, down nearly 50 percent last year. As a result the cuts at FMR likely include some analysts with weak stock-picking records, said John Bonnanzio, who edits an independent newsletter for Fidelity investors.

"Probably they're getting rid of people where they took a hard look at their stock recommendations" that didn't work out well, he said.

Hiring more analysts had been a key part of Fidelity's strategy since 2005, and the company now has more than 500, said spokeswoman Anne Crowley, up from around 300 in 2005. Yet, Crowley added the company currently has offers for analyst jobs to about 30 individuals at colleges and MBA programs. And while she wouldn't give more details about what they would do, Fidelity's recent annual report for 2008 made clear its new head of asset management, Michael Wilens, has his eye on foreign turf.

In the report, Fidelity described how it "remained committed to fundamental research" such as expanding its London office and planning to hire more investment professionals in Hong Kong and Tokyo.

Fidelity also soon plans to open an office in Miami focused on Latin American investing.

And in his letter in the annual report, Fidelity chairman and chief executive Edward C. "Ned" Johnson III noted Fidelity has created "small groups of more closely focused analysts and managers."

"Overall equity mutual fund performance is not where it should be," Johnson wrote.

Indeed, just 36 percent of the company's equity stock funds beat their peers last year, down from 72 percent in 2007, according to the report.

International funds did a little better, beating 42 percent of competitors, compared with 73 percent in 2007.

Christopher Davis, an analyst who follows Fidelity for Chicago research firm Morningstar, said the emphasis on foreign investments makes sense for the company given how much competition there is already for research on large companies in the United States.

"They have a better chance of getting an edge overseas than here, and that's where research can really pay off," he said.

Ross Kerber can be reached at kerber@globe.com.

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