Fidelity announced last week that it is cutting 1,695 employees, or more than 5% of its workforce, in a widely expected cost-reduction measure at the nation's largest mutual fund company.
Rumors of Fidelity layoffs have been circulating as of late, with some analysts predicting that as many as 10% to 15% of the workforce, including fund managers and analysts, would lose their jobs.
Further layoffs are not currently planned, said Anne Crowley, a spokeswoman for the Boston-based firm. Crowley called the speculation of a 10% to 15% reduction "pure rumors," adding that those published reports were simply inaccurate.
The layoffs will affect a range of employees, from support personnel all the way "up to very senior executives," she said, noting vice presidents and senior vice presidents will be among those let go.
However, escaping the chopping block were fund managers and fund analysts, due to Fidelity's "broad product line," Crowley said. "Fund management is a core part of our business," she said, noting that Fidelity has launched seven new funds so far this year, including the Fidelity Ultra-Short Bond and the Total Bond funds, and plans on launching seven more. The firm at press time declined to disclose which sectors the new funds would cover.
Meanwhile, State Street Corp. announced last Wednesday that it has laid off 75 workers from its marketing, legal and facilities departments. The cutbacks are the third this year for State Street, which has let 500 employees go so far this year. The firm also announced the sale of its corporate trust business to US Bancorp in August, a division that employs about 500 people. A State Street spokeswoman said while it has not been finally determined, it is likely that most of those individuals will be transferred to US Bancorp. Furthermore, the spokeswoman said further cuts were a possibility.
The cuts at Fidelity leave total employee count at roughly 29,300, down from a peak of 33,000. Fidelity's assets under management have also been rapidly declining since their peak of nearly $1 trillion in the summer of 2000, falling to $776 billion as of the end of August.
The firm's funds have not been performing well, either. Fidelity's $60 billion Magellan Fund is down 25.3% so far this year through the end of August, according to Lipper of New York. However, the average large-cap core fund returned 25.0% in the same period. Fidelity's $18 billion, balanced Puritan fund is off 11.4%, compared to 13.7% for its peers.
"Fidelity, like every other financial services firm, has had to manage through a lengthy market downturn," the company said in a statement.
For sure, mutual fund and other financial service firms have been no stranger to layoffs since the market turned south. In fact, this is not the first time Fidelity has had to pare back its workforce. Last October, Fidelity trimmed its staff by 760 employees, roughly 2% of its workforce at the time [see MFMN 11/05/01].
Janus eliminated nearly half of its workforce at the end of last year and recently said more jobs could be lost. Deutsche Asset Management, Putnam Investments, State Street Corp., FleetBoston Financial, among others, all have announced cost-reduction initiatives that involved eliminating jobs within the last two years. And Charles Schwab was one of the most recent to announce the cuts, announcing layoffs of 1,880 of its staff, or 10% of its workforce [see MFMN 9/23/02].
"Fidelity is in a cyclical business and recognizes that when the market roars as it did in the '90s, it has to adjust to that changing market to meet the demands of the business. Likewise, when the market rolls back as it has over the last three years, the company needs to adjust the business to align its resources with the new market environment," the company said in a statement. "This is a natural course of business in a cyclical industry."