BOSTON - Fidelity Investments Inc. could be the next big money manager to announce layoffs, sources say.
The cuts are expected early next month, and sources predict they will be steeper than layoffs last year involving 760 employees, mostly concentrated in Fidelity's brokerage unit. The new round could include top executives and money management professionals, the sources said.
Fidelity spokesman Vin Loporchio said no decision has been made, adding each Fidelity unit is looking at "all costs, across the board."
Assets under management fell to $773 billion as of July 31, down 12% since Dec. 31, according to Fidelity data. Despite the drop, Mr. Loporchio said, revenues are strong; close to half come from non-investment management fee business, he noted.
Russ Kinnell, analyst at Morningstar Inc., Chicago, doesn't expect deep layoffs or meaningful investment cuts. "Fidelity has weathered the storm better than many firms," he said.
"Good investment talent is such a rare commodity, even in a bear market," said Mr. Kinnell, noting investments the firm made in the 1970s in investment talent paid off in the bull markets of the 1980s and 1990s.
But Burt Greenwald, president of B.J. Greenwald Associates, Philadelphia, said he wouldn't be surprised to see investment management talent affected at Fidelity because the prospect for a surge in the stock market and an increase in net inflows is bleak. As a result, said Mr. Greenwald, money management firms are finding that if they want to improve the profit picture, the answer comes on the expense side.
To date, Fidelity has not reduced investment or portfolio management staff. But it has had some defections, including four portfolio managers who joined American Express Asset Management Group, Boston.
Geoff Bobroff, president of Bobroff Consulting, a mutual fund industry consultant in East Greenwich, R.I., said the cuts at Fidelity and other money managers are actually "right-sizing" to reflect the depreciation of assets caused by the bear market and wary investors. He said he wouldn't be surprised if cuts start affecting senior level employees because reductions to lesser-paid employees only generate so much savings.
Fiscal responsibility
The cutbacks show fiscal responsibility by firms that haven't been faced with these tough decisions in a long time, said Kevin Quirk, partner at Casey Quirk & Acito, Darien, Conn., a management consultant. Through the bull market, firms bulked up, adding staff on the sales, customer service, distribution and marketing sides of the business. Now, many of these areas are being downsized, said Mr. Quirk.
He said a lot of companies are focusing on their long-term strategies as executives take a closer look at which ponds they want to fish in. The market downturn is "a good wake-up call for business managers."
"The return to strategy is a reality now," said Mr. Quirk, after taking a back seat through much of the market runup in the late 1990s and early 2000. The first 12 to 18 months after the market crashed paralyzed executives at some firms, who waited to see what might happen, he said. But now, more firms are making changes for the long term.
Among those are Loomis Sayles & Co. LP, Boston, and Janus Capital Corp., Denver.
Cuts at Loomis, Janus
Late last week, Loomis announced it was eliminating 28 jobs, including six portfolio managers, as part of an early retirement program. Of the six portfolio managers, four are fixed-income portfolio managers and two are equity portfolio managers. The company would not release the names of the retiring portfolio managers, said said Chris Lazzaro, company spokesman. The early retirement package was offered to 38 employees; no determination has been made as to whether there will be any layoffs this year, he said.
Janus underwent a major restructuring earlier this month when it was announced that all of the investment management operations of Stilwell Financial Inc., Kansas City, Mo., will be merged into one money management organization, Janus Capital Management Inc., Denver.
As a result, Janus expects to lay off about 140 workers, primarily from Berger Financial Group LLC, Denver, and Stilwell, said Shelley Peterson, Janus spokeswoman. She does not anticipate any cuts to personnel at this time, and added that any changes are subject to shareholder approval. Janus, which had $145 billion in asset under management through June 30, reduced its staff by 222 people earlier this year. Janus had been up to $330 billion in March 2000.
