UPDATE 2-Fidelity Investments tech VC team forms own firm

* Fidelity Ventures team forms Volition Capital in Boston

* Says will manage Fidelity Ventures-backed start-ups (Adds Cheng comment, details on assets and private investments)

By Ross Kerber

BOSTON, Jan 11 (Reuters) - Leaders of Fidelity Investments' technology venture capital arm have left to start an independent investment company, executives said on Monday.

Under an agreement with Fidelity, Volition Capital will continue to manage various assets that the principals developed while at the Boston-based mutual fund giant.

Managing partners of the new firm include Larry Cheng, Andy Flaster, Roger Hurwitz and Rob Ketterson.

Fidelity Ventures will cease operations, at least for now, said a company spokesman. Fidelity will not have an ownership stake in Volition.

The spinoff "was driven by the partners' aspiration to invest on our own and to expand our sources of capital to include third parties," Cheng said in a telephone interview.

The unit was part of Fidelity's Devonshire Investors division, which uses money from Fidelity's controlling Johnson family and other employees to back companies including Pembroke Real Estate and the Boston Coach limousine company.

Fidelity has spent hundreds of millions of dollars to prop up one of its private investments, the building materials company ProBuild, amid the real estate downturn, according to a recent prospectus.

Cheng said those difficulties played no part in the decision to spin off Volition.

Fidelity continues to support venture capital through other means, including its Fidelity Growth Partners unit in Europe and Asia, Fidelity spokesman Michael Shamrell said. A separate U.S. unit, Fidelity Biosciences, will continue, Shamrell said.

Fidelity Ventures managed investments totaling more than $800 million at the end of 2007, according to the privately held company's most recent disclosure.

Volition will manage U.S. investments totaling $400 million, said Cheng and Shamrell. The larger previous figure may have included money that was not invested in companies at the time, they said. (Reporting by Ross Kerber. Editing by Tim Dobbyn and Robert MacMillan)