Remembering Fidelity's Ned Johnson

Remembering Fidelity’s Ned Johnson

March 30, 2022

An industry pioneer passed away last week. Edward C. (“Ned”) Johnson III, the former chairman of Fidelity, passed away after a long illness. He was 91.

Fidelity was founded in 1946 by Mr. Johnson’s father, Edward C. Johnson II, to serve as investment adviser to the $3 million Fidelity fund. But it was under Ned’s stewardship that Fidelity became one of the largest investment firms in the world—and a portal that helped connect Wall Street to Main Street. Johnson served as chief executive officer of Fidelity from 1977 to 2014, then as chairman from 1977 until his retirement in December 2016.

Born in 1930, Mr. Johnson received a Bachelor of Arts degree from Harvard College in 1954, and he joined Fidelity as a research analyst in 1957. His insight and passion—along with a useful contrarian streak—helped him stand out. In 1960, he was ranked the No. 1 fund manager of the year by Lipper, Inc., for Fidelity Trend fund. He managed Fidelity Trend fund from 1958 to 1967 and was Fidelity Magellan fund’s first portfolio manager, running it from 1963 to 1971.

Mr. Johnson became president of the company in 1972, quickly earning a reputation as an innovator within the financial services industry. He pioneered the direct marketing of mutual funds in the 1970s and made Fidelity the first company to offer check-writing on money market funds. He broke new ground with 24-hour in-house customer service, and in 1995, Fidelity was the first major investment firm to launch a website. During his tenure, the firm opened its own discount brokerage, advancing its reach among individual investors, and it became the nation’s biggest 401(k) business. The firm’s assets under management were $3.9 billion when Mr. Johnson became president; when he retired, they stood at $2.1 trillion.

At Adviser Investments, we’ve observed, analyzed and invested with Fidelity and its managers for over 20 years. We also share many of the values that helped Ned Johnson build the fund titan that Fidelity is today: A belief in the power of the right active manager, the pursuit of excellence, and a focus on achieving long-term investment goals. He will be missed.

Chart of the Week: The Reality of Wartime Returns

We monitor a wide range of data to form our outlook on the market and the broader economy—every other week, we’ll spotlight one indicator our analysts have found informative.

Director of Research Jeff DeMaso By Director of Research Jeff DeMaso 

A little over a month ago, Russia invaded Ukraine; surely stocks are down and bonds are up since then, right? Not quite.

This week’s chart plots the returns of a few major markets as measured by Vanguard’s index funds.

Fidelity ned johnson
Note: Chart shows cumulative gains/losses for U.S. stocks (Vanguard Total Stock Market Index), emerging markets stocks (Vanguard Emerging Markets Stock Index), European stocks (Vanguard European Index) and Treasurys (Vanguard Intermediate-Term Treasury Index) from 2/23/22 through 3/23/22. Sources: The Vanguard Group, Adviser Investments. Sources: The Vanguard Group, Adviser Investments.

Going region by region for stocks: European equities fell the hardest at first—no surprise there—but after tumbling 11.9% in the first two weeks, they had nearly recouped all of their losses as of Wednesday night. The U.S. has been the best-performing region, with Vanguard’s Total Stock Market Index fund up 5.6% since the Russian invasion. Emerging markets are down the most. After falling into correction territory (down 12.3%), Vanguard’s Emerging Markets Stock Index fund has rebounded and is only 4.5% below its prewar level—a loss is a loss, but that’s not a bear market or a crash.

As for bonds, let’s look at U.S. Treasurys—historically the safe-haven asset of choice that you might expect investors to flock to after a war breaks out. Well, Vanguard’s Intermediate-Term Treasury Index fund is off 2.1% since the invasion began.

Two lessons from this chart: First, the market impact of most geopolitical events isn’t as severe or as long-lasting as you might expect. Second, timing the market based on macro events is difficult—if not impossible.

Flex Funds Out at Fidelity

In 2017, Fidelity launched Flex funds, its first zero-fee mutual funds. Now half of the lineup in its Flex suite are on the chopping block.

The Flex funds’ distribution was limited to Fidelity’s own fee-based accounts, and they were available to clients of its robo-adviser, Fidelity Go. The firm followed up the pioneering Flex suite in 2018 by launching the Fidelity ZERO no-fee index mutual funds for brokerage clients.

Fidelity plans to shutter 11 of its 22 Flex funds by June, according to SEC filings. The funds to be liquidated have a combined $557 million in assets under management as of last month, and they include a mix of equity and fixed-income offerings. 

Flex Funds to Be Closed

Flex International
Flex Core Bond
Flex Large Cap Growth
Flex Large Cap Value
Opportunistic Insights
Intrinsic Opportunities
Flex Small Cap
Flex Inflation-Protected Bond
Flex Short-Term Bond
Flex Real Estate
Flex Mid Cap Growth

Other funds in the Flex lineup have been more successful in attracting inflows, and the firm has announced no plan to terminate the $2.8 billion Flex S&P 500 Index fund, the $1.3 billion Flex International Index fund and the $1.3 billion Flex U.S. Bond Index fund.

Podcast: Panic Selling and Relief Rallies—Our Experts Weigh In

The past several weeks have been some of the most volatile in history for both stocks and bonds, with war, inflation and a new COVID-19 crackdown in China just a few of the crises causing tumult for investors. In this episode of The Adviser You Can Talk To Podcast, Portfolio Manager Steve Johnson asks our market experts about the indicators we’re watching and the moves we’re making in response. Topics include:

  • Why it’s worth investing abroad despite the geopolitical instability
  • Whether the Fed can walk the line of taming inflation without spurring recession
  • How a systematic approach to trading can help investors navigate volatility
  • What bargains may exist today for risk-tolerant investors

No one with money in the market has come out of the past several weeks without a few more gray hairs. Let our experts provide clarity with some rational thinking and smart advice. Click here to listen now!

Adviser Investments’ Today’s Market Takeaways

There’s no shortage of hyperbolic headlines and provocative punditry in the financial media. But you won’t find such hysterics here. In Today’s Market Takeaways, members of our investment team provide timely videos that clearly and concisely explain what we’re seeing in the markets.

Recently, Vice President Steve Johnson offered his thoughts on the flurry of activity in the options markets, while Senior Research Analyst Liz Laprade revealed why we should bother with bonds.

We hope you find these episodes engaging and accessible. If there are any topics you’d like us to address, please send an email to info@adviserinvestments.com!

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.


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