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Rating:Fido's Net Flows, Revenue, and Costs Rise; Earnings Slip Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, February 19, 2016

Fido's Net Flows, Revenue, and Costs Rise; Earnings Slip

News summary by MFWire's editors

In 2015, Fidelity's [profile] net asset management flows turned around and its revenues reached new heights, yet it earnings slipped from 2014.

Abigail Johnson
Fidelity
President, Chief Executive Officer
Abby Johnson (president and CEO of the Boston Behemoth) and her father, Ned Johnson (chairman), just issued their 28-page Fidelity Investments Shareholder Update for 2015, Abby's first full year as CEO. Operating income fell 5.9 percent to $3.2 billion, yet revenue rose six percent to a record $15.9 billion and "discretionary flows" swung to $32.8 billion in net inflows (compared to $8.6 billion in net outflows in 2014). Assets under administration rose two percent to $5.15 trillion and AUM rose one percent to $2.04 trillion. And costs rose.

"Increased investments in technology and staffing, including the addition of more than 3,000 new associates to the FFS [Fidelity Financial Services] organization, contributed to a total expense of $12.7 billion, which was 10% higher than the previous year," the Johnsons write.

Bloomberg, the Boston Business Journal, tthe Financial Times (twice), Reuters, and the Wall Street Journal all covered Fidelity's overall results. Our sister publication 401kWire offers a deeper dive into Fidelity's giant workplace investing business (which is dominated by its giant defined contribution retirement plan recordkeeping business), where the participant count rose 3.2 percent to 25.8 million while AUA slipped 0.68 percent to $1.45 trillion.

In a four-page section of the report, Fidelity asset management president Charles Morrison digs deeper into his unit's results. He notes that, despite strong equity fund performance, Fidelty's equity funds suffered $18.8 billion in net outflows in 2015. Yet more than $6 billion net flowed into Fidelity's sector funds, $11.7 billion net flowed into Fidelity's bond funds, and $28.5 billion net flowed into Fidelity's money market funds.

"Fidelity's consistently strong investment performance has shown that there is long-term value in active management; that said, sometimes perception can overshadow reality," Morrison writes. "To combat this, the organization brought the active story to the marketplace through venues such as advertising, thought leadership, client events, earned media, and digital channels such as Fidelity.com."

In line with the "innovation imperative" theme of the overall report, Morrison stresses product development as key to the future of Fidelity's asset management business.

"Going forward, ...the organization will continue to look at diversifying its investment product and service offerings," Morrison concludes. "It's imperative that Fidelity be fast to market with new ideas and innovative products that meet the evolving needs of its customers."  

Correction: A prior version of this story gave the wrong 2015 operating income for Fidelity. Fidelity brought in $3.2 billion in operating income last year.

Edited by: Neil Anderson, Managing Editor


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