Standard & Poor's has lowered its debt rating on Fidelity Investments from stable to negative, citing how the company has lost business to competitors and diversified its business into areas other than mutual fund asset management, Bloomberg reports.
"The negative outlook is principally due to the loss of market share caused by the underperformance in domestic equities, as well as the higher risk profile stemming from the investments in noncore businesses," wrote S&P Analysts Charles Rausch and Helene De Luca in a report.
S&P is principally concerned over net withdrawals from a number of Fidelity flagship funds, DeLuca said. Fidelity Magellan alone saw net withdrawals of $28.5 billion between the beginning of 2004 and April of this year.
But Fidelity spokeswoman Anne Crowley noted how the performance of Fidelity's funds has improved in recent months, and with it, so have net flows. In the first four months of this year, Fidelity funds took in net flows of $30.1 billion, whereas throughout all of last year, they only netted $18.7 billion, Crowley said. In the 12 months through March 31, Fidelity funds delivered better performance than 71% of their peers, compared to 58% of their peers in the previous year, Crowley pointed out.