Fidelity Investments

Mutual funds

FMR has three fund divisions: Equity (headquartered in Boston, Massachusetts), High-Income (headquartered in Boston) and Fixed-Income (headquartered in Merrimack, New Hampshire). The company's largest equity mutual fund is Fidelity Contrafund, which has $107.4 billion in assets,^[11] making it the largest non-indexed fund in the US. The current manager of Contrafund is William Danoff.

Fidelity Magellan is another large equity fund, with $15.5 billion in assets.^[12] Its current manager is Jeffrey Feingold, who also manages the Fidelity Trend Fund. It was previously managed by Ned Johnson from May 2, 1963 to Dec. 31, 1971, Peter Lynch from May 31, 1977 to May 31, 1990 and Harry W. Lange from 2005 to 2012.

Brokerage

Fidelity Investments operates a major brokerage firm and has investor centers in over 140 locations throughout the US. Through its subsidiary, National Financial Services LLC, Fidelity Investments provides services to its correspondent broker-dealers, institutional investment firms, banks and trusts, family offices,^[13] and registered investment advisors including brokerage clearing and back office support and a suite of software products for financial services firms. National Financial was the custodian for over $443 billion in assets, in 4.3 million accounts as of September 30, 2010.^[13]

Benefits outsourcing

Fidelity Personal, Workplace and Institutional Services (PWIS) is the largest provider of 401(k) retirement plan services with $1.4 trillion under administration^[14] and $32 billion in total defined contribution assets, as of 2015.^[14] Other services provided include pension administration, health & welfare administration, stock plan administration as well as payroll and other record-keeping services.

Devonshire Investors

The company's Devonshire Investors arm is a division that gives the owners of the company the ability to make other investments outside its funds.^[15]

Assets include Veritude, an employment agency for jobs at Fidelity.^[16] The company has been a major investor of real estate, owning the Seaport Center and 2.5 million square feet of office space in Boston.^[17] It formerly owned Community Newspaper Company, the largest chain of newspapers in suburban Boston, Massachusetts, sold to the Boston Herald in 2000^[18] and now owned by GateHouse Media. Fidelity has also strategically invested in the telecom/managed services/data center industries, including COLT Telecom Group in Europe,^[19] MetroRED in South America, and KVH Co. Ltd. in Japan. Since 2008, all MetroRED ownership has been completely divested.

It was formerly heavily invested in commercial lumber and building materials.^[20] In 2013, they sold Boston Coach, a limousine and black-car service, founded in 1985 by Ned Johnson after waiting too long for a taxi, to Harrison Global.^[21] It formed ProBuild Holdings in 2006 and sold it to Builders FirstSource in 2015.^[22]

Donor-advised fund

Fidelity manages a donor-advised fund, Fidelity Charitable, in 1991, becoming the first commercial DAF provider. As of 2017, Fidelity Charitable is currently the largest charity by donations from the public, surpassing the United Way. Tax donations to a DAF can be registered in the year of the donation, when the beneficiary may be being chosen. In a 2015 survey by Fidelity Charitable, 90% of donors who responded stated this benefit as the main reason for starting donations using a DAF. Donors also cite that this allows them to give more to charity. Investments in a DAF register interest until the distribution is given to a beneficiary.^[23] Fidelity Charitable produces a report "Women and Giving" that examines differences in giving attitudes, strategies and priorities across generations and gender.^[24]

In 2016, Fidelity Charitable raised nearly $7 million in bitcoin. As of June 2017, the organization's annual report said that nearly $2 billion had been committed by all funding methods, with almost $9 million in bitcoin.^[25]

Insiders' private investments competing with their customers

A private venture capital firm, F-Prime Capital Partners, managed on behalf of owners and other key leaders of Fidelity Investments, has been described as directly competing with Fidelity Investments public funds. A 2016 Reuters investigation identified multiple cases where F-Prime Capital Partners ^[26] was able to make investments at a fraction of the price of Fidelity Investments. Because of SEC regulations, investments by F-Prime Capital Partners preclude Fidelity from making the same early investments. The investigation describes that this competition forces Fidelity to delay investing until later and at much higher prices than F-Prime Capital Partners, resulting in lower returns for Fidelity fund shareholders.^[26][27]

Corporate governance experts have stated that the practice is not illegal, but that it poses a clear corporate conflict of interest.^[26] Fidelity spokesmen have stated that they are following all laws and regulations.^[26][28]

Appearance of insiders propping up private investments

The same Reuters investigation documents six cases (out of 10) where Fidelity Investments became one of the largest investors of F-Prime Capital companies after the start-up companies became publicly traded. Legal and academic experts said that major investments by Fidelity mutual funds - with their market-moving buying power - could be seen as propping up the values of the F-Prime Capital investments, to the benefit of Fidelity insiders.^[26]

Fidelity declined to comment on this aspect of the investigation.^[28][26]

Document retention fines

In February 2007, the NASD, a division of the Financial Industry Regulatory Authority, fined 4 FMR-affiliated broker-dealers $3.75 million for alleged registration, supervision and e-mail retention violations. The broker-dealers settled without admitting or denying the charges.^[29]

In 2004, Fidelity Brokerage paid $2 million to settle charges by the U.S. Securities and Exchange Commission that employees altered and destroyed documents in 21 of its 88 branch offices between January 2001 and July 2002. Fidelity has internal inspections every year to make sure it is complying with federal regulations. Management was accused of pressuring branch employees to have perfect inspections and gave notice of the inspections and that at least 62 employees destroyed or altered potentially improper documents maintained at branch offices including new account applications, letters of authorization and variable annuity forms.^[30]

Misrepresentations

In May 2007, NASD fined two Fidelity broker-dealers $400,000 for preparing and distributing misleading sales literature promoting Fidelity's Destiny I and II Systematic Investment Plans, which were sold primarily to U.S. military personnel. As part of the settlement, the FMR affiliates were required to notify Destiny Plan holders who want to increase their investments in existing Destiny Plans that additional shares of the underlying fund can be purchased outside the Destiny Plans without paying the additional sales charges.^[31]

Johnson Family

The founding Johnson family, individually and through various trusts, owns stock representing a 49% voting interest in FMR, and have signed agreements pledging to vote all their shares as a bloc. Edward Johnson III was chairman of the group, but was replaced by his daughter, Abigail Johnson. Abigail was once the largest single shareholder with about 25% ownership, but in October 2005, it was reported that she had sold a "significant" portion of her shares to family trusts, and that there were doubts as to whether she was still in line to succeed her father.^[32]

Employees and ex-employees

Most of the remaining 51% of the company is held by various Fidelity employees and ex-employees, including fund managers and ex-managers, such as Peter Lynch.^[33]

Paul McCartney marketing campaign

Fidelity has experimented with marketing techniques directed to the baby boomer demographic, releasing Never Stop Doing What You Love, a compilation of songs by Paul McCartney. McCartney became the firm's spokesman in 2005 in a campaign entitled "This Is Paul." On the day of the disc's release, company employees were treated to a special recorded message by Paul himself informing them that "Fidelity and [he] have a lot in common" and urging them to "never stop doing what you love".^[34]