Fidelity Fund Empire Bermuda ties
Theres something fascinating about a Fidelity Investments — a privately held, family business with $3.5 trillion in assets under administration as of January 2012.
Founded in 1946, its now the second-largest US mutual fund company and one of the worlds largest independent investment managers. Its also run by two of the richest people in America — a father-daughter duo with ties to Bermuda.
Abigail Johnson, freshly promoted to the No. 2 role at Fidelity Investments, inched her way higher on the Forbes 400 list of richest Americans this week. At No. 27, with a net worth of $11.8 billion, she is the wealthiest woman in Boston and is also the wealthiest Bostonian full stop.
Widening the gap on her father, Edward Ned Johnson, who slipped to No. 52 from No. 44, even though his net worth held steady at $6.5 billion the magazine said one of the most powerful women in the world of investment just got even more powerful.
Passing the baton
Her promotion last month likely means Ms Johnson will eventually become Fidelitys chairman, replacing her father who has been chairman and CEO of the company since taking over for his father in 1977.
Ms Johnson now runs all of the Fidelity Management & Research Companys (FMR) main businesses — including Fidelity International Limited (FIL) — a separate fund company founded in 1969 for investors outside North America. Spun off as a Bermuda-registered company in the 1980s, the company, as of June 30, manages $217 billion in savings, according to its website. FIL was rebranded Fidelity Worldwide Investments in 2011.
Regulatory filings indicate that the Johnsons own 39.89 percent of FIL. Based on the average assets under management-to-market capitalisation multiples of four comparable fund managers — Aberdeen Asset Management Plc, Henderson Group Plc, Man Group Plc and Schroders Plc — FIL is worth $2.7 billion.
Fidelity Worldwide London-based spokesman Peter Yandle said the Johnsons own a substantial minority holding and fund managers and senior employees own the rest.
Fidelity Worldwide isnt the only connection the Johnsons have to the Island. Mr Johnson is both an American citizen and Bermuda resident. He owns a home in Somerset and Ms Johnson is believed to have a home in Paget. The familys charitable foundation, the Edward C. Johnson Fund, has also disbursed more than $225 million to charities since 2000, according to IRS filings. Among the major recipients of the gifts was the Bermuda Underwater Exploration Institute (BUEI).
The family has also given more than $200 million to charities in the US and Canada through the New Hampshire-based Fidelity Foundation.
The Johnsons are extremely important both as a major employer and as part of the Boston and Massachusetts brand and they are very philanthropic in what they have done, said Paul Guzzi, President of the Greater Boston Chamber of Commerce.
Fidelitys assets under management grew from $39.5 billion in 1985 to $409.5 billion a decade later. Today, it manages $1.6 trillion in assets — about 12 percent of the US market, according to data compiled by Investment Company Institute, a Washington, D.C.-based industry association. American households now hold 23 percent of their assets at investment companies.
The rise of Fidelity mirrors the surge in American do-it-yourself investing. In 1977, when Ned Johnson III became CEO of FMR, Americans had less than three percent of their financial assets in mutual funds, according to ICI data. That percentage began to rise with the introduction of new investment vehicles, such as 401(k) plans, individual retirement accounts and simplified employee pensions. During this time, Mr Johnson began marketing Fidelity funds directly to the public, cutting out brokers with sales commissions of as much as eight percent.
His daughter, Abigail, is now the fourth richest woman in America, according to the Forbes 400. According to Bloomberg news, her two siblings, Fidelity heirs, Edward C. Johnson IV, 47 and Elizabeth L. Johnson, 49, are estimated to have fortunes of $2.5 billion each. However, the latter two did not appear on the Forbes 400 list.
Vincent Loporchio, a spokesman for FMR LLC, Fidelitys parent company, said the Johnsons declined to comment on their net worth or the companys ownership structure. The Johnsons family office, Crosby Advisors LLC, relocated from Boston to Salem, New Hampshire, in 2010, according to Financial Advisor Magazine. The move may have been prompted by the states favourable trust taxes, the magazine said.
The Johnson familys most valuable asset is Fidelity Investments. The closely held mutual fund operator reported revenue of $12.8 billion and operating income of $3.3 billion in 2011. According to a 2010 FMR bond offering statement, the company had $9.2 billion in debt at the end of 2009.
Based on the average enterprise value-to-earnings before interest and taxes and enterprise value-to-sales multiples of five publicly traded peers — BlackRock Inc., Franklin Resources Inc., Invesco Ltd., Legg Mason Inc. and T. Rowe Price Group — Fidelity is valued at about $37 billion, more than any other fund management company in the US
The success of the company speaks to their effectiveness as managers, said Robert M. Gervis, owner of Boston-based consulting firm Epilogue LLC. Gervis spent 15 years managing various Johnson family investment companies and Fidelity divisions.
Abigail Johnson is now the fourth richest woman in America, according to the Forbes 400. According to Bloomberg news, her two siblings, Fidelity heirs, Edward C. Johnson IV, 47 and Elizabeth L. Johnson, 49, are estimated to have fortunes of $2.5 billion each. However, the latter two did not appear on the Forbes 400 list.
The Johnson family owns 49 percent of the company, according to US Securities and Exchange Commission filings. The remaining 51 percent stake is split among 108 Fidelity executives, according to a March 2010 bond prospectus.
Because Fidelity is a privately held company, the exact ownership by the four Johnson family members is less transparent. According to the most recent SEC filing from August 2005, Abigail Johnson owns 24.5 percent of the company and her father owns 12 percent. Since that filing, Fidelity has elected to disclose only the total family ownership.
According to an SEC official who asked not to be identified because the agency isnt authorised to discuss specific companies, if any person had 25 percent or more ownership of FMR, it would have to be specifically disclosed.
The remaining 12.5 percent of FMR is split between Elizabeth Johnson and the younger Ned Johnson, according to the index. A December 31, 2000, report to Utahs Department of Insurance listed the pair as each owning 5.6 percent, according to a 2004 Bloomberg Markets magazine article. A 2012 SEC filing states they own from 5 percent to 9.9 percent.
In 2006 and 2007, FMR reorganised its shares down to a single class in order to meet a US Internal Revenue Service requirement for receiving tax treatment as an S-corporation. As part of the restructuring, shareholders — including the four Johnsons — received $2.9 billion in subordinated debentures as payment for the terminated shares.
Fidelity Investments and Fidelity Worldwide arent the only jewels in the Johnson familys business empire. The family also owns BostonCoach Corp., a transportation company operating in 40 countries, the Boston Seaport, a 180,000 square-foot waterfront hotel and exhibition complex in Boston, a lumberyard chain, a farm and interests in oil and gas. Fidelity is worth about $37 billion and the Johnson familys net worth is estimated at $22 billion.
The growth attributed to the elder Johnsons reign has slowed in recent years. Annual sales remain below 2007s peak of $14.6 billion. Abigail Johnson, now responsible for asset management, brokerage, retirement and benefits services, still reports to her 82-year-old father. She has been with the company for 24 years and has an MBA from Harvard Business School.
Her bother, Ned Johnson IV, who lives on Bostons Union Wharf, is President of family-owned Pembroke Real Estate, a company he helped create in 1997. Pembroke manages 6.5 million square feet of office and residential real estate, including the Boston Seaport. Pembrokes primary clients are Fidelity investors and family investment vehicles, according to the 2010 FMR prospectus.
Elizabeth Johnson listed her employer as Louisburg Farm Inc. on political donations to Massachusetts Republican Senator Scott Browns 2010 campaign, according to the Washington, D.C.- based Center for Responsive Politics. Louisburg Farm is a horse show barn near the Winter Equestrian Festival grounds in Wellington, Florida. She has been President of the company since it registered with the Florida Secretary of State in 2004.
The Johnsons hold some personal investments through Boston-based Northern Neck Investors LLC, an investment adviser that has $2.2 billion in assets. According to a March 2012 SEC filing, Northern Neck is principally owned by the Johnsons, and includes investments benefiting other FMR executives.
Based on an analysis of the filings, it is estimated the Johnsons own about 80 percent of Northern Necks assets. Details about Northern Necks holdings were disclosed in the 2010 FMR prospectus due to accounting principles that required disclosure because of the Johnson familys control of FMR.
Among Northern Necks major holdings is ProBuild Holdings Inc., the largest lumberyard chain in the US. The company has 435 locations in the US and had sales of $3.2 billion in 2009.
Northern Neck also held $403 million in oil and gas reserves in the Rocky Mountain region and the mid-continent through FIML Natural resources, according to the March 2010 bond prospectus.
The family also owns Nashua, New Hampshire-based human resources services company HR Access North America; Madison, Maine-based hydroponic tomato grower Backyard Farms LLC; and Boston-based temporary staffing firm Veritude LLC.