No1 funds manager Fidelity to fire 1,290

Fidelity Investments, the world's largest mutual-fund manager, plans to cut about 1,290 jobs this month and fire more employees in the first quarter of next year after client assets fell 13 per cent.

The initial dismissals represent 2.9 per cent of its 44,440 workers, Boston-based Fidelity said in a statement today. The company, whose Magellan and Contrafund have been among the industry's worst performers, didn't say how many jobs will be eliminated next year or how much it expects to reduce expenses.

In a letter distributed to Fidelity employees Thursday, Fidelity President Rodger Lawson said recent market volatility has hurt company revenue and "has led me to conclude that many of the cost improvement plans which would have been phased in by our business units over the next three years need to be accelerated."

The announcement follows two other recently-reported layoffs from mutual companies. Janus Capital Group Inc. is cutting 115 jobs, which equals nearly 10 per cent of its work force. Alliance Bernstein Holding LP did not specify its number of pink slips.

The biggest market losses since the Great Depression and investor withdrawals have lowered Fidelity's assets under management to $1.4 trillion from $1.6 trillion as of 31 December.

Reeling markets made Fidelity's more than 400 mutual funds targets for jobs cuts as well. According to the latest financial data, assets at Fidelity's funds had lost nearly 23 per cent of their value through October of this year, to nearly $717 billion.

Magellan Fund, with $21.9 billion in assets, has tumbled 47 per cent over 12 months, including reinvested dividends. The $29.2 billion Fidelity Diversified International Fund has dropped 46 per cent and Fidelity Contrafund, the company's largest stock fund at $51.5 billion, has declined 35 per cent.

"We are trying to implement these cuts in a thoughtful and measured way," said Fidelity spokeswoman Anne Crowley, noting that many of the cuts would be management positions. "The de-layering of management, we believe, will help."

Employees who lose their jobs will remain on the payroll until the end of this year, receive severance payments according to their salaries and years of service and would be eligible for 2008 bonuses. Crowley wouldn't say how much the severance packages will cost Fidelity.

The firm said another round of layoffs would occur in the first quarter of 2009. The company did not specify the number for the second round of cuts, but Crowley said it would be less than the 2,500 cuts that were projected in recent media reports.

Crowley said that investors have continued to pour money into Fidelity's mutual funds, with a net gain of $30 billion so far this year. But the value of these investments, particularly in equity, has declined in step with the stock market. The benchmark S&P 500 has lost more than one-third of its value so far this year.

``These are extraordinary times,'' Fidelity said in its statement. ``Prudent management warrants that we carefully examine all of our costs.''