Fidelity to cut nearly 1,300 jobs this month

By Muralikumar Anantharaman

BOSTON (Reuters) - Fidelity Investments will cut nearly 1,300 jobs, or 2.9 percent of its staff, this month and plans more layoffs in the first three months of next year, the world's biggest mutual fund company said on Thursday.

Fidelity's biggest job cuts in six years follow a slump in assets as investors pull record amounts of money from mutual funds during the financial crisis. Details of the second round of job cuts will be finalized in coming weeks, Fidelity said.

"While our company overall is doing well and is strong and stable, the extraordinary world events of the last couple of months have certainly had an impact on our revenues," Fidelity spokeswoman Anne Crowley said.

She said Fidelity's total layoffs would not be as large as recent reports suggested, though she declined to say how many jobs would be cut in the first quarter. Industry newsletter Ignites said on October 27 that Fidelity may cut up to 4,000 jobs.

"We are confident that the number will be smaller than what has been reported," Crowley said.

Privately held Fidelity, which employs 44,400 people globally, already cut about 1,000 jobs in three rounds of layoffs in the past year, but there have been no cuts in its main money management business.

"Fidelity wouldn't do this unless things are tough," said Henry Higdon, a managing partner of Higdon Partners, an executive search firm in New York that serves financial clients including Fidelity.

"If they thought things were going to get better, that we had hit the bottom already, they may not have done this. I think what that tells you is that most of these organizations expect things to get worse," he said.

As markets boomed over the past five years, Fidelity added 15,000 employees. That followed cuts of 1,700 jobs, or 5.4 percent of its workforce, in the last bear market of 2002 in the wake of the bursting of the technology bubble.

It also slashed 10 percent of workforce in the late 1980s, Crowley said.

Crowley declined to say whose jobs would go in the latest layoffs but said most business units were gearing up for cuts.

The announcement followed an e-email sent to staff earlier on Thursday by Fidelity President Rodger Lawson that said layoffs would come this month and in the first quarter of next year, according to a source close to Fidelity.

MONEY-MARKET INFLOWS

Fidelity and other fund companies, including Legg Mason Inc (LM.N) and Janus Capital Group Inc (JNS.N), are scrambling to cut costs during market turmoil brought on by losses in subprime mortgages that have snowballed into the worst financial crisis since the 1930s.

The industry generates the bulk of its revenue from fees based on a percentage of assets under management, which have dropped sharply.