BOSTON — Fidelity Investments' plans to create a separate institutional money management unit should eventually help the mutual fund giant win more pension and endowment business, but observers said the firm risks losing a number of its existing clients during the transition.
That's because several of Fidelity's star mutual fund managers also handle clone accounts for institutional investors, and under the firm's proposed plans, those investors will have to move to new portfolio managers at Fidelity's institutional arm during the next 12 to 24 months.
Some industry experts welcomed the firm's March 16 announcement. "What Fidelity is doing makes good sense" in addressing the significantly different needs of retail and institutional investors, said Chris McNickle, a managing director with Greenwich Associates, Greenwich, Conn.
Details of Fidelity's plans remain sketchy. What emerged, however, was the impression of a company in a hurry.
In an interview, Bob Reynolds, Fidelity Investments vice chairman and chief operating officer, said the firm would spend more than $100 million and hire more than 100 investment professionals over the next 24 months to launch a company with portfolio managers, research analysts and traders focused strictly on institutional money.
Fidelity will look to fill key positions, including chief executive officer and chief investment officer, in the next 30 to 60 days, Mr. Reynolds said.