The formation of Fidelity Institutional Asset Management marks the end of the road for Fidelity Investments' long-struggling institutional business, Pyramis Global Advisors.
Sources said that throughout its 10-year existence, Pyramis faced issues of being unable to effectively make its mark in the institutional money management space, confusion over its corporate identity and a lack of support from Fidelity's senior leadership.
Boston-based Fidelity announced on Oct. 15 that it was creating FIAM, a money manager with more than $540 billion in assets under management and administration, by combining its Pyramis and Fidelity Financial Advisor Solutions arms.
In merging these two businesses, Fidelity is expanding its definition of “institutional” to include assets from intermediaries on behalf of individuals, such as registered investment advisers and broker-dealers.
Increasing demand for institutional-level services from clients more traditionally seen as retail was a key driver in Fidelity's decision.
Scott Couto, former president of Fidelity Financial Advisor Solutions and now head of distribution for FIAM in Smithfield, R.I., told Pensions & Investments the merger was done to streamline operations.
“Over time, there's been a significant convergence of buying demands of (the) institutional channel as well as the intermediary services. It made sense to have one focused team on a global scale,” Mr. Couto said. He said there will be no changes on the investment side of the business, but now each client will have one point of contact, regardless of what investment vehicle they're in.
Perhaps Fidelity is seeing the writing on the wall.
Money manager consultant Casey Quirk & Associates LLC, Darien, Conn., issued a white paper on Nov. 16 making the case that individual investors will be more influential in shaping the marketplace than institutions in the near future.
Casey Quirk's white paper, “The Roar of the Crowd: How Individual Investors Transform Competition in Asset Management,” states that by 2020, 119% of net new flows into investment strategies will come from individual investors, up from 93% in 2014.
Benjamin Phillips, a partner at Casey Quirk and co-author of the paper, declined to comment about Fidelity.