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Boston Finance Jobs With Fidelity Could be Cut

Posted on October 29, 2008

Keeping with the national trend, one Massachusetts’ company is cutting Boston finance jobs.

Fidelity Investments recently announced it is considering a plan to reduce its staff as it suffers negative cash flow in its stock mutual funds. According to an article by The Wall Street Journal, layoffs could include as many as 4,000 employees, or about 9 percent of Fidelity’s work force. While other industries in Boston are adding jobs, cuts at Fidelity would affect a number of the company’s units, including its core investment-management branch.

The company is “very stable, and very strong, but certainly these are extraordinary times,” Anne Crowley, spokeswoman for Fidelity, said in the article, adding the company has been reviewing its costs and staffing amid market turmoil.

Fidelity’s fund flows are still in positive territory so far this year, Crowley added, because many investors have been moving their money into fixed-income and money-market funds. In total, Fidelity had $28 billion in net deposits to its funds through Sept. 30 and deposits also were up so far this month.

Mutual-fund companies earn much of their money from fees assessed as a percentage of assets, meaning that market declines and redemptions of fund shares have a direct impact to them.

Fidelity, the largest fund company by money under management, had nearly $1.3 trillion in assets held in stock, bond and money-market mutual funds as of Aug. 31, slightly more than the same time a year ago, according to the latest data from the Investment Company Institute.

But these figures don’t include the most recent market turmoil. In September, for the third consecutive month, more money came out of Fidelity’s stock mutual funds than went in, estimates Chicago research firm Morningstar Inc. Fidelity had net redemptions, or outflows, of $6.2 billion in stock mutual funds in the month. Morningstar says that is second only to American Funds, which it estimates had $8.5 billion leave.

Fidelity isn’t the only company to cut back. Janus Capital Group of Denver recently announced it was cutting 9 percent of its work force, while New York’s AllianceBernstein Holding LP‘s chief executive called layoffs “unavoidable” and American Century Investments said it can’t rule out a reduction in staff.

However, experts are remaining positive amid a local economy still adding jobs.

“While investors have been putting money into fixed-income funds, particularly U.S. government-bond funds and money-market funds, they have been taking money out of more volatile stock funds, which typically have higher fees and are the most profitable products sold by fund companies,” the article adds.