Although Fidelity Investments’ revenue in 2006 rose 16%, its profits decreased 11%, primarily because the firm reinvested them in new businesses to diversify and expand revenue streams, the Associated Press reports. Businesses in which it invested money for research, technology  and advertising include employee benefits and expanding its bank and insurance channels.

“In typical Fidelity fashion, they don’t really care about quarter-to-quarter or even year-over-year,” said Eric Kobren, executive editor of Fidelity Insight. “They continue to spend pretty heavily, especially on the technology side.”

Moody’s analyst Matthew Noll, applauded the diversification but noted that money management is Fidelity’s most profitable business.

“That’s good in that it is strengthening the diversification of their business lines, but it’s a little bit negative because management of the money is the most profitable and stable thing they do. As their revenue mix goes into these other things, they’re gong to start pressing their margins a little bit more.”

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.