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UPDATE 1-Fidelity's operating profit surged nearly 20 pct in 2016
February 16, 2017 / 5:21 PM / in 8 months

UPDATE 1-Fidelity's operating profit surged nearly 20 pct in 2016

(Adds details from Fidelity’s annual report)

BOSTON, Feb 16 (Reuters) - Fidelity Investments said on Thursday its financial services operating profit rose 19.5 percent to $3.5 billion in 2016 despite massive withdrawals of investor money from its actively managed stock funds.

Fidelity’s stable of stock pickers badly lagged peers in 2016, beating only 36 percent of them for a 1-year period. By contrast, Fidelity’s investment-grade bond funds beat 67 percent of peers.

Revenue totaled $15.9 billion in 2016, an increase of 3.4 percent over 2015, according to Boston-based Fidelity, which is controlled by the family of Chairman Abigail Johnson.

Its actively managed equity mutual funds had net outflows of $57.7 billion during the year. They were offset by inflows of $19.1 billion into managed account products, $22.6 billion into money market funds, and $16.1 billion into Fidelity index funds.

“We achieved this revenue growth in the face of headwinds from industry-wide pricing pressures, the emergence of new financial technology competitors, and shifting customer preferences,” the company said in its annual report.

Fidelity ended the year with $2.13 trillion in assets under management, a year-over-year increase of 5 percent and the most in the company’s 70-year history.

The annual report is the first with Abigail Johnson as chairman. She succeeded her father, Edward C. Johnson III, in December.

Under the elder Johnson, who had been chairman since 1977, Fidelity was slow to move into exchange-traded funds (ETFs), for example, allowing Vanguard Group and BlackRock Inc to dominate the sector.

But in 2016, Fidelity continued to slowly build out its line-up of ETFs. That helped produce net flows into Fidelity discretionary products of $9.3 billion, while total non-discretionary asset flows were $209.6 billion, up 33 percent from $158 billion in 2015. (Reporting by Tim McLaughlin; Editing by Chizu Nomiyama and Jeffrey Benkoe)

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