Interesting Piece On Fidelity

Bloomberg have an interesting piece about how US giant Fidelity is dealing with lower fees from mutal funds and the growth of exchange traded funds.

What jumped out at me was the massive size of the US fund management industry – just 3 large players are gargantuan:

Fidelity employs 40,000 people in the U.S., managed $1.7 trillion in assets directly as of June 30 and administered a total of $4 trillion worldwide. In addition to its financial services income, the FMR holding company took in an estimated $4.52 billion in revenue last year from private-equity investments, including real estate and a building materials company.

The firm has struggled to grow money-management assets. Vanguard, which surpassed Fidelity as the biggest U.S. mutual-fund company in 2010 and offers mostly index funds and ETFs, has been a beneficiary of the shift into passive funds. Its assets surged 73 percent to $2.6 trillion during the six and a half years from the end of 2007 to June 30, 2013. BlackRock, the world’s biggest money manager, more than doubled assets to $3.9 trillion in the period.Pimco, whose funds are overseen by Co-Chief Investment Officer Bill Gross, has seen its assets more than double to $2 trillion.

The piece was particularly interesting following NZ First Leader Winston Peters’ comments about setting up a “KiwiFund” as a condition of any confidence and supply agreement after next year’s election. He might want to read John Cochrane on the size of the finance industry and how it’s misunderstood.

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