BOSTON (Reuters) - When Ronald O’Hanley takes over as Fidelity Investments’ top money management executive this summer, his biggest job may be to stay out of the way.
The 53-year-old executive advanced his career by melding smaller money management units into BNY Mellon’s $1 trillion asset management unit, often leaving executives in place even as he absorbed their companies.
That light touch might be his best approach at Fidelity as well, say analysts who follow the privately held firm founded by its chairman’s father. Some of its best-known funds have been performing well and its challenges seem to have been created by market forces rather than strategic decisions.
“I don’t think his mission is to make radical new music,” said Jim Lowell, who edits a newsletter for Fidelity investors. “He’s just the new conductor for something already built.”
Maintaining the status quo would mark a different battle plan from Fidelity’s recent past. The Johnson family, which controls the company, has churned through a series of investment leaders since the start of 2007, when top executive Stephen Jonas retired.
The next year, the company named outsider Michael Wilens to head asset management, but moved him to a new post in 2009 after putting an insider, Jacques Perold, in place with many of the same powers. In the interim, another investment executive, Dwight Churchill, retired, and equities head Walter Donovan left for Putnam Investments. Also, international investments officer Eric Wetlaufer left this past March.
The changes mirrored shifts at other parts of Fidelity, whose president, Rodger Lawson, replaced much of the top leadership before quitting in March after less than three years on the job.
Whatever the need for such a makeover, it does not appear to have held Fidelity back. On balance, the firm’s funds have posted good track records recently.
The well-known Contrafund has beaten 62 percent of its peers so far this year and 78 percent over three years. The Magellan fund, which former manager Peter Lynch turned into a household name, came back in 2009 after a dismal 2008.
Beating market indexes helps Fidelity draw in steady asset flows from retirement plans, now a more important source of income to the company than the cash that star managers like Lynch once lured in from retail investors.
Leaving things alone might also suit O’Hanley’s deft touch at running complicated organizations.
“He understands the ‘if it ain’t broke, don’t fix it’ philosophy,” said Robert Mainer, a retired executive who worked with O’Hanley at BNY Mellon in the 1990s.
Fidelity and BNY Mellon spokespeople said O’Hanley would not do interviews before starting his job. Nor would members of the Johnson family, including Chairman Edward C. “Ned” Johnson III, who turns 80 next month, and his daughter Abigail Johnson, 48, who many expect will run the company someday.
Already vice-chairwoman of Fidelity’s parent company, Abigail Johnson was named as a president earlier this month, with new duties in the distribution of Fidelity products.
From an investment standpoint, O’Hanley’s new job marks the bigger change because he will oversee Fidelity’s core mutual fund business FMR Co, along with its Pyramis institutional unit and other asset-management divisions, with about $1.5 trillion under management all told.
Like other fund companies known for equity funds like Janus Capital GroupJNS.N and American Funds, Fidelity faces a challenge among retail investors, who pulled money out of stocks amid the financial crisis and have returned slowly.
Data from Lipper, a Thomson Reuters company, show retail investors withdrew $61.2 billion from Fidelity funds in the 15 months ended March 31, even as institutional investors added $101 billion. During that stretch, some rivals posted big retail inflows including Vanguard Group Inc and T Rowe Price Group, showing respective strengths in index funds and retirement accounts.
But Fidelity’s challenge is different because much of its outflows have have come from its money-market funds, which have been hurt by low interest rates.
“Fidelity is not making the money it used to off of money funds, and that’s where they are seeing the profit pressure,” said Don Dion, a money manager in Williamstown, Massachusetts, who keeps about a third of his clients’ $550 million in Fidelity funds.
Dion noted that other companies like JPMorgan Chase & Co (JPM.N) and Federated Investors Inc (FII.N) face similar money-fund problems, and said O’Hanley should not shake up the area, at least for now. “It’s one of those things he (O’Hanley) can’t do anything about until rates go back up,” Dion said.
Another manager with a similar amount of money at Fidelity, Michael Eckton of Crestwood Advisors in Boston, praised Fidelity’s improved performance and said that its fees have stayed competitive.
“The funds they have, they have run them well. They went off track a number of years ago and that has been fixed,” Eckton said. For O’Hanley, he added, “There are not substantive changes for him to make.” (Reporting by Ross Kerber. Editing by Robert MacMillan)