Fidelity Investments is a financial services company that began in 1946 as a mutual fund company. Today, Fidelity Management and Research LLC (headquartered in Boston) owns and manages mutual funds throughout North America and is the world’s largest mutual fund company. As of September 2007, it managed over $1.57 trillion for over 23 million investors in over 400 funds. In 1969, Fidelity International Limited was spun off to handle international investments. Today, headquartered in Bermuda, it manages over $287 billion.
In addition to mutual funds, the parent company also owns distributors, investment advisory firms, discount brokerages, retirement advisory and wealth management firms, securities trade clearing and executions firms, life insurance firms, human resource and benefits outsourcing firms. In 2005, Paul McCartney became commercial spokesman for the parent company, increasing its already-high profile.
Fidelity Mutual Funds
In the 1980s, Fidelity became world-famous, thanks to the performance of its flagship mutual fund, Fidelity Magellan, managed by legendary investor Peter Lynch. Today, the Fidelity Contrafund is the world’s largest single-manager mutual fund with $69 billion under management. Magellan is second-largest with $45 billion.
In recent years, performance of Fidelity funds has markedly worsened. Apart from cyclical fluctuations that have lowered stock prices in general, the biggest factor in this decline in performance has been the difficulty in managing the huge fund inflows caused by Fidelity’s exploding popularity. An occupational hazard of success in mutual-fund management is that success breeds publicity, which leads in turn to capital inflows. Managers are forbidden by law from owning more than 5% of any company. (This provision is intended to prevent a fund from manipulating prices by limiting the number of shares it could demand or supply in the market.) Eventually, massive inflows force investment in less promising companies, lowering returns.
One side effect of the worldwide financial crisis in 2008 has been to relieve this pressure, albeit in an undesirable way. Falling stock prices have lowered market valuations and returns and produced massive fund outflows. Assets under management in Fidelity Management and Research LLC have fallen to $396 billion.
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Among the huge selection of financial products at Fidelity are many low-cost, outstanding values. Fidelity annuities are among the lowest-cost in the industry; annual annuity costs are roughly half of the industry average. Fidelity annuities consist of those issued by Fidelity Investments Life Insurance Company and Empire Fidelity Investments Life Insurance Company (the New York issuer) and the fixed annuities issued by outside companies, called Fidelity Preferred Outside Providers. Although Fidelity vets its outside providers, it is still desirable to check any company before purchasing its annuities. Fidelity’s insurance companies are rated A+ (the 2nd-highest rating) for financial strength by A. M. Best ; A+ (the 5th-highest rating) by Standard & Poor’s; and AA (the 3rd-highest rating) by Fitch.
Fidelity annuities include both fixed and variable annuities. Its fixed annuities include single-premium immediate annuities and deferred fixed annuities. Its variable annuities include an immediate variable annuities as well as deferred variable annuities. Its variable annuities offer many funds included in the top two rating categories (4-star and 5-star) from Morningstar, the leading mutual-fund rating service.
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