Fidelity Investment’s Lawson says search is on for his own replacement

Fidelity Investments' moves to reorganize and diversify beyond its core mutual fund business are paying off.

Fidelity Investments’ moves to reorganize and diversify beyond its core mutual fund business are paying off.

The nation’s largest mutual fund company is reporting market share gains this year and more money flowing in across its expanded range of financial services.

In an interview Wednesday, Fidelity executives also indicated their expansion plans likely won’t include exchange-traded funds. Fidelity has largely been absent in ETFs while rivals enjoyed rapid growth.

And Fidelity’s president, Rodger Lawson, suggested changes could be in store for the 63-year-old company’s structure as a privately held firm. It’s currently 49 percent-owned by the Johnson family, with the rest held by key company employees. Fidelity’s leader is Edward “Ned” Johnson III, who remains CEO and chairman at the age of 79.

Lawson didn’t indicate who will take over whenever Johnson steps down.

To streamline its business, Johnson brought in Lawson two years ago as president. Meanwhile, Fidelity has consolidated some of its business units, and recently cut 3,000 jobs.

In an interview with Bloomberg, Mr. Lawson also said that he’s looking for his own replacement sometime down the line.

“I will stay with Fidelity as long as it needs me,” he yesterday in the interview.

“I don’t see myself here when I’m 72,” Lawson, who is now 62, told Bloomberg.

The search for his successor is part of a succession plan that “picked up pace” in 2009, he said in the Bloomberg interview.

A decision on Johnson’s replacement “all presupposes how the company is organized,” Lawson told The Associated Press. “And there are lots of different ways the company could be organized into the future. I wouldn’t want to show my cards on that one. But whatever the outcome organizationally, we have a well-structured succession plan.”

While Lawson wouldn’t reveal any details, he said, “Obviously, the family is going to be an ongoing feature of the company whatever happens in the future.”

Boston-based Fidelity, founded by Johnson’s father, remains best known for its more than 400 mutual funds, but in recent years has accelerated its shift into new areas, such as individual retirement planning, employee benefit management and brokerage operations.

The shift has come as Fidelity’s funds have seen sometimes spotty performance in recent years, and come under fee-cutting and asset-gathering pressure from rivals such as Vanguard Group and Capital Group’s American Funds.

Lawson and Fidelity Chief Financial Officer Robert Chersi said Wednesday that the company’s reorganization and expansion into new financial services were well-timed because the changes positioned the company to ride out the market collapse and recession.

“We started going down this path before things became very, very difficult in 2008,” Lawson said. “It was judgment, but it was also luck.”

“I believe we came out more efficient,” he said. “Nothing has blown up.”

Lawson said it’s “very, very unlikely” the company will have any more major job cuts now that it has completed the reductions announced last November.

As a private company, Fidelity discloses limited financial data, and Lawson would only say the company’s revenue through this year’s first half “is looking better than the competition.” In the company’s last update, in February, Fidelity said its 2008 operating profit fell 18 percent compared with 2007.

Fidelity relies heavily on management fees, and said total assets were up 8 percent to $2.8 trillion as of June 30, from $2.6 trillion at the close of 2008.

Managed assets make up about half the total, at $1.36 trillion, including a net $44.2 billion that investors put into mutual funds through this year’s first six months. The other half of the administered assets total is money for which Fidelity performs record-keeping and other administrative services.

Fidelity said other indicators of its business improvement include:

— Fidelity’s total inflow of $44 billion to its stock, bond and money-market funds is tops in the industry through June, with Vanguard second at $43.6 billion, according to data Fidelity cited from the research firm Strategic Insight.

— Fidelity’s share of the $9.1 trillion Strategic Insight counts in industrywide mutual funds stands at 12.4 percent, up from 11.7 percent at year-end. Vanguard also saw a share increase, but remains below Fidelity at 11.8 percent.

— Fidelity’s funds — including fixed-income — outperformed 75 percent of their peers in this year’s first six months, the company said, citing internal data blending numbers compiled by two outside fund trackers, Morningstar and Lipper. That’s up from 56 percent beating their peers through all of 2008.

— Fidelity’s stock funds beat 64 percent of their peers through this year’s first half, a turnaround from 2008, when they beat just 36 percent.

Morningstar analyst Christopher Davis said this year’s strong performance for Fidelity’s stock funds was unsurprising given that they lagged last year. Many of its largest funds bet heavily on volatile stocks that were hurt worse than most last year, but have rebounded more strongly during recent months’ rally, Davis said.

During the recent volatility, many investors have embraced ETFs, baskets of stocks that differ from mutual funds in that they can be traded like stocks during daily trading sessions, rather than being priced once a day. EFTS have drawn attention in part because of BlackRock Inc.’s pending acquisition of the investment unit of Barclays in a $13.5 billion deal that includes the British bank’s ETF business, iShares. That unit commands about half the $582 billion U.S. ETF market, followed by State Street Global Advisors and Vanguard Group.

Fidelity hasn’t been a player, other than as a distributor selling its clients ETFs offered by other firms.

Lawson said Fidelity’s role in ETFs has spurred “a lot of debate internally.” But he doesn’t foresee a move to take on iShares, State Street and Vanguard in directly offering ETFs.

“I think at this stage of the game, there are established players … and we make all their products available to our clients,” Lawson said. “I suspect — never say never — but I suspect that is the direction we will stay in.”