Fidelity to cut workforce as fund assets slump
More fallout from the global market meltdown: Mutual fund titan Fidelity Investments said today that it will cut nearly 1,300 jobs this month, or about 3% of its workforce, as plunging fund assets reduce the company's management fee income.
More cuts will come early next year, the company warned.
From Bloomberg News:
The initial dismissals represent 2.9% of Fidelity's 44,440 workers, the Boston-based company said in a statement. Fidelity, whose Magellan and Contrafund have been among the industry's worst performers this year, didn't say how many jobs will be eliminated next year or how much it expects to reduce expenses.
The biggest market losses since the Great Depression and investor withdrawals have reduced Fidelity's assets under management to $1.4 trillion from $1.6 trillion since Dec. 31.
"The cuts appear to be fairly modest, given the scope of what's happened in the financial markets, but it's clear that bigger cuts are coming," said John Bonnanzio, group editor of Fidelity Insight, an independent newsletter in Wellesley, Mass.
Fund companies earn money from management fees that are assessed as a percentage of portfolio assets. So as fund values dive, so do fees.
Some of Fidelity's rivals also have been slashing staff.
From Bloomberg:
Janus, based in Denver, said it will eliminate 115 jobs, or 9% of its workforce, in an effort to save $45 million a year. AllianceBernstein, the New York-based fund affiliate of French insurer Axa, said it will fire an undetermined number of workers.
Baltimore's Legg Mason Inc. said it planned to dismiss as many as 50 of its 147 employees at Legg Mason Capital Management, the investment unit run by Bill Miller, after assets fell 53% this year.
Miller's Legg Mason Value Trust, once one of the fund industry's brightest stars, had plummeted 52% this year through Wednesday, compared with a 34% drop for the Standard & Poor's 500 index.
Fidelity Magellan was down 46% for the year.
Photo: Outside a Fidelity office in Boston (Matt Campbell / EPA)
