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 Johnson already had day-to-day control over operations that include
mutual funds, an online brokerage and the biggest U.S. administrator
of 401(k) retirement plans.
Over the past decade, Boston-based Fidelity, which had managed
assets of $2 trillion at the end of August, has ceded its
once-powerhouse status to Vanguard Group as its actively managed
mutual funds have become less appealing to investors focused on
lower-cost index funds and exchange-traded funds.
Johnson, 52, will continue to report to her 84-year-old father,
Edward C. Johnson III, Boston-based Fidelity's chairman. The elder
Johnson had been chairman and CEO of the company since taking over
from his father in 1977. The announcement was contained in a memo
distributed on Monday to employees.
"Abby Johnson has agreed to become chief executive officer of
Fidelity, reflecting a further step forward in our leadership
succession plan," according to a Fidelity memo from the elder
Johnson viewed by Reuters. "Abby will retain her role of president
and I will continue to serve as chairman of the board."
Fidelity is the second-largest U.S. mutual fund company behind
Vanguard. It is best known for its stable of actively managed mutual
funds including the $100 billion-plus Contrafund.
Vanguard's low-cost approach, however, has been the clear winner in
recent years. Over the past year, for example, net deposits into
Vanguard funds have totaled $171 billion, as of Aug. 31, according
to Morningstar Inc.
In contrast, Fidelity had net withdrawals of nearly $19 billion from
actively managed funds during the same period. Net deposits into
Fidelity passive funds totaled about $9 billion, according to
Morningstar.
"As we have noted in the past, a major source of Fidelity’s outflows
during the past year has been conversions to collective investment
trusts," Morningstar analysts wrote recently. "However, it is
surprising that these outflows are not being offset by organic
inflows."
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Abby Johnson, as she is known inside the company, worked summers at
her family's firm before college. She graduated from Hobart and
William Smith Colleges in Geneva, New York, with a degree in art
history. She worked for two years after graduation at consulting
firm Booz Allen.
She then obtained an MBA from Harvard Business School before joining
Fidelity as an analyst in 1988. In the 1990s, she ran three
different stock funds before moving into management. In 2001, she
was named president of the fund division and in 2005 she switched
jobs to take charge of Fidelity's benefits and retirement plans
unit.
It wasn't until recently that her place as heir apparent to her
father was truly secure. That happened in 2012 when she was promoted
to run all of the company's main businesses, ending years of
speculation about who would succeed Edward "Ned" Johnson.
(Reporting By Tim McLaughlin; Editing by Meredith Mazzilli)
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