While American Funds and Vanguard raked in $74 billion apiece in 2007, Fidelity Investments netted $2 billion, according to Strategic Insight data. It was the first time in 20 years Fidelity didnt rank in the top 25 fund houses in terms of net sales.
This, undoubtedly, has created serious angst for Chairman Edward Ned Johnson III, but sound management of the firms 450 mutual funds is good news for investors, Forbes reports.
As an indication of how big Fidelity has become, one only needs to take a look at the size and the history of its flagship fund, Fidelity Magellan. Ever since it topped $20 billion, its performance has sagged.
Among Fidelitys domestic equity funds that are 10 years or older, only 44% have outpaced their peers in the last decade. That improved markedly last year, when 73% bested their categories. On top of this, Fidelitys U.S. equity funds are offered at a reasonable average cost of 1.26%, 30 basis points below the industrys average.
But investors and financial planners have failed to take notice. And while the slowdown in asset growth is, of course, an anathema to management, more manageable expansion is a boon to investors.
In fact, having become a one-stop shop with low expense ratios, excellent service and a well-diversified, highly professionally managed stable of offerings grouped into eight specialized category divisions, is great news for investors.
Fidelity has such a scale advantage, its easier for them to operate with a lower-cost model, according to Fidelity analyst Christopher Davis of Morningstar. Fidelity may also have lowered its costs to help its portfolio managers performance shine, he added.