Edward C. Johnson III, chairman of Fidelity Investments, will be stepping down from the Boston-based mutual fund giant in December, handing the reins to his daughter, Abigail Johnson, its current chief executive,
according to the Wall Street Journal.
Mr. Johnson, 86, had been CEO of the company from 1977, when he took over from his father, until 2014. Under his guidance, the company became a powerhouse of active management, cultivating star managers such as Peter Lynch, manager of Fidelity Magellan, and Will Danoff, manager of Fidelity Contrafund.
Mr. Johnson, known as Ned in the company, joined the privately held Fidelity in 1958 as an analyst and ran Magellan from 1963 to 1971, where he powered the fund to a 104% gain in 1967, beating Mr. Lynch's best year. Mr. Johnson is also credited with offering the first money market mutual fund with check writing privileges. He will become chairman emeritus and continue to work in the company's Boston headquarters.
"I don't think it's an exaggeration to say that Ned Johnson brought a better Wall Street to Main Street through the model of discount brokerage," said James Lowell, editor of Fidelity Investor, a newsletter. "Back then, he wasn't making any friends on Wall Street by bringing up the word "discount." His focus on superior talent delivered at very low cost to the individual investor, while clearly out of vogue now, continues to have high value for any long-term investor."
Abigail Johnson, 54, has been working for Fidelity since 1988, managing money and running several of Fidelity's business units, including its asset management business. She became CEO in October 2014, and is credited with expanding the company worldwide, cutting costs and slashing the expenses of its index funds to levels below archrival Vanguard's offerings. Fidelity's earnings
jumped 29% in 2014, despite fund outflows.
“Abby will have responsibility for the management of all FMR businesses, including Fidelity Financial Services and Fidelity's other diversified businesses and investments,” Mr. Johnson wrote in a letter to employees. “This expansion of responsibilities is a natural progression of Abby's 28-year career at Fidelity, in which she has taken on increasingly more challenging and complex roles. Please join me in wishing Abby much success in her new role.”
She inherits a very different company than her father did.
"His mission was to bring better investment products to the retail marketplace," Mr. Lowell said. "She's done a good job of righting a listing ship. She's going to focus on advisers and gatekeepers and use Fidelity's technology, scope and scale to deliver investment products at a lower cost."
Wall Street reaction was positive.
“She has literally grown up in the business and her career in all aspects of the organization should benefit the firm," said Moody's credit analyst Neal Epstein. "We believe this appointment, while expected, is credit positive given how in tune Abigail Johnson is with the competitive trends in the industry and her limited tolerance for non-core activities that may distract from the core business.”
As an owner of Fidelity, which manages $2.1 trillion in assets and has $5.5 trillion under administration, Ms. Johnson, like her father, is a billionaire. Forbes magazine ranked her as the most powerful woman in finance for 2016, with a net worth of $13.2 billion. Her father's net worth is estimated at $7.4 billion, and the Johnson family's worth is put at $28.5 billion.
