The downward revision reflects “some erosion of the company’s market share in long-term mutual fund assets under management, the growing prominence of lower margin businesses in its overall business profile and increasing risk from non-core investment activities,” Moody’s said in a news release.
Dagmar Silva, Moody’s vice president, tied the negative outlook to “relatively weak performance of Fidelity’s equities funds, which has led to a loss of market share,” according to the release. While conceding that Fidelity maintains leading market positions in retail brokerage and defined contribution plans, Moody’s noted those businesses have lower margins than asset management.
Reached by telephone, Ms. Silva noted that Fidelity’s share of inflows into long-term equity and bond funds has trended lower, as has the contribution to the group’s earnings from its relatively high-margin asset management business.
Asked for comment, Vin Loporchio, Fidelity spokesman, said the company “is doing very well,” with operating income up 17% in 2010 to $2.9 billion, “one of our best years in history.” The company continues to invest strongly in its businesses and grow, he added.
Mr. Loporchio pointed to market data from market research firm Strategic Insight showing Fidelity’s share of the domestic equity mutual fund market has risen to 12.7% by the end of 2010 from 12.4% at the end of 2008, while its share of the international equity mutual fund market has risen to 7% from 6.9% during the same period.