BOSTON (Reuters) - Fidelity Investments does not need to do an initial public offering to raise capital, Chairman Abigail Johnson said in a Bloomberg Television interview that aired on Wednesday.
Johnson, the third generation of her family to run the Boston-based mutual fund group, said Fidelity does not need the capital that an initial public offering would bring. She made her remarks in a rare interview on Bloomberg’s “The David Rubenstein Show.”
Johnson said investment bankers often pitched her father on the idea of taking Fidelity public.
“We don’t need the capital is the first thing that he would say,” Johnson said. She added that staying private allows Fidelity to have more flexibility while not needing to explain quarterly results to a broad audience.
“Returns matter a lot,” Johnson said. “It’s our capital.”
But she said that having consistent quarterly returns is not as important when you’re running a company for long-term results.
Johnson succeeded her father, Edward C. Johnson III, as chairman last year. Her grandfather started the company in the 1940s after he became bored working as an attorney and wanted to pursue his passion for investing money, she recounted.
Fidelity manages about $2.5 trillion in assets and is best known for its stable of actively managed mutual funds that include the $100 billion-plus Contrafund (FCNTX.O).
Over the past decade, Fidelity’s actively managed funds have been hemorrhaging assets as investors sought lower-cost, passively managed index and exchange-traded funds (ETFs).
Over the past year, Fidelity’s actively managed funds have suffered nearly $56 billion in net withdrawals, according to data from Morningstar Inc.
But Fidelity’s passive investment products, including ETFs, have recorded $44 billion in net deposits over the past year as it expanded offerings that are as cheap or cheaper than rivals, according to Morningstar.
Vanguard Group remains the dominant force in the U.S. fund industry, with about $4 trillion in assets under management. About $328 billion in net deposits flowed into Vanguard passive investment funds over the past year, according to Morningstar.
Johnson, who has worked at Fidelity for nearly 30 years, said clients want low fees, good service and high returns.
She said during the interview that one challenge in running a large, established company is getting employees to look beyond the horizon for the next new thing.
“When everyone is running the machine and it’s all working, there’s a tendency to look at the short term and focus on incremental opportunities and not look ahead to the really big opportunities,” Johnson said.
Reporting by Tim McLaughlin; Editing by Scott Malone and Jeffrey Benkoe