Fidelity reportedly may lay off up to 4,000
Market upheaval hurting business
Fidelity Investments acknowledged yesterday it is studying cost cutting but declined to comment on an industry report that it plans to lay off up to 4,000 employees as plunging stock markets cut into the value of its mutual funds business.
The online trade publication Ignites.com, citing unidentified sources, reported yesterday that Fidelity plans two sets of layoffs in the coming weeks: 1,500 before the end of the year and another 2,500 early next year. The job reductions would be focused on back-office staff, Ignites said.
A person who has spoken with Fidelity executives involved in the planning confirmed to the Globe that the firm is considering cutting up to 4,000 people, but said those reductions would come throughout the company, including employees who work with customers and in its core mutual funds business. At any investment company with declining assets, "there has to be some type of adjustment," said this person, who also requested anonymity because of the sensitivity of the situation.
Fidelity spokeswoman Anne Crowley would not comment on the layoff predictions, but said company officials are poring over expense sheets.
"Our business leaders are evaluating all of their operations, company by company and division by division, to make sure they're well-positioned for the future," Crowley said. Some new hiring also has been slowed, she added.
In addition to running the world's largest mutual funds complex, Fidelity provides retirement plan and other administrative services for companies. Fidelity chairman Edward C. "Ned" Johnson has pushed into other lines of business to diversify the company's revenue base and make it less vulner able to the gyrations of stock markets.
But Fidelity is best known for its mutual funds. Investment management businesses get paid on the value or amount of the assets they have under management. So when stocks lose value, as they have to a whopping 40 percent so far this year, or when customers withdraw funds, the investment managers get paid less.
Some of Fidelity's well-known funds, such as Magellan, have lost more than their peers in the recent market turmoil. Moreover, customers withdrew $8.3 billion from Fidelity equity and bond funds in August and September, or 13 percent of the $61.8 billion that was withdrawn from all mutual funds during that period, according to the Chicago research firm Morningstar Inc. The figures do not include money market funds, however, traditionally an area of strength for Fidelity. Crowley said investors have put more money into Fidelity funds than they have withdrawn this year, due to strong flows into its money market funds and some bond fund inflows.
Fidelity's chief executive, Rodger Lawson, has emphasized cost cutting since he was brought in to head the family-controlled firm last year. In the last 12 months, Fidelity has reduced employment by around 1,000. As of mid-2008, it employed 45,500 worldwide, including about 11,500 in Massachusetts.
Crowley said the company's performance has been strong through September but did not provide more detail.
Fidelity reported profit of $911 million on revenue of $14.9 billion in 2007. Rating agency Moody's Investors Service said Fidelity had an even higher profit margin for the first quarter of 2008.
Ross Kerber can be reached at kerber@globe.com. 