(Adds background, details on investor withdrawals, further
By Tim McLaughlin and Ross Kerber
BOSTON Nov 21 Long-time Fidelity Investments
Chairman Edward C. Johnson III will retire next month and will
be succeeded by his daughter, Abigail Johnson, the company said
During his nearly 40-year run as chairman of Boston-based
Fidelity, Johnson turned the family-controlled company into a
mutual fund powerhouse with $2.1 trillion in managed assets. His
innovations include creating the first money-market fund with a
check writing feature.
But over the past decade Fidelity's advantage has slipped as
investors each month pour billions of dollars into passive
investment strategies, namely index funds run by archrival
The elder Johnson's retirement was not unexpected, as he is
86 years old and Abigail Johnson, 54, has been running the U.S.
mutual fund giant on a day-to-day basis as chief executive
officer since 2014. She will add the chairman's title and her
father will keep regular office hours as chairman emeritus,
Fidelity spokesman Vincent Loporchio said.
In recent months, the elder Johnson was seen walking with
the aid of a cane along Charles Street in Boston's tony Beacon
Hill neighborhood. But his retirement is not related to health
reasons, Loporchio said.
Founded in 1946 by Abigail Johnson's grandfather, Edward
Johnson II, Fidelity remains a leader in the administration of
retirement plans, such as keeping records on $5.6 trillion in
assets that include corporate 401(k) accounts. And its online
brokerage business has more than 17 million retail accounts.
The Johnsons were not available for comment.
John Bonnanzio, editor of Fidelity Monitor & Insight, an
independent newsletter for Fidelity investors, said Abigail
Johnson's new title was no surprise.
"At this point, with the clear transition that has taken
place over a decade, was it ever in doubt? The only shocker here
would have been for something other than this to happen.
Effectively, it's been hers to run for a while now," he said.
But Fidelity was slow to respond to the mutual fund
industry's seismic shift into passively managed index funds. The
fallout continues to hurt Fidelity.
During the 12-month period that ended Sept. 30, for example,
investors made nearly $41 billion in net withdrawals from
Fidelity's stable of actively managed mutual funds, according to
Morningstar Inc. By contrast, Vanguard's passive funds collected
$234.1 billion in net deposits during that period.
Under the direction of Abigail Johnson, however, Fidelity
has launched a flurry of index funds in recent years. Those
passive funds had $241 billion in assets at the end of October,
but still a small figure compared to Vanguard's nearly $2.5
trillion in passive assets, according to Morningstar.
Fidelity's actively managed funds had $1 trillion in assets
at the end of September, led by the $100 billion-plus Contrafund
, which alone generates several hundred million dollars
a year in management fees.
Actively managed funds have been the linchpin of the Johnson
family's fortune. The clan's net worth is estimated at $26
billion by Forbes magazine, making them the 9th-richest family
in the United States.
James Lowell, editor of Fidelityinvestor.com, an independent
newsletter for investors, said he expects Abigail Johnson to
increase Fidelity's outreach to the financial advisers and other
intermediaries who steer clients to its funds and retirement
"She'll be very focused on the gatekeepers," Lowell said.
"They are as important to her as new products were to her
(Reporting By Tim McLaughlin; Editing by Chris Reese, Bernard