Johnson Hits Hedge Funds

An excerpt from the April 30, 2003, edition of The

In a rare public appearance, Abigail Johnson, chief of mutual funds at Fidelity Investments, took aim last night at hedge funds and new regulations aimed at her industry, while urging investors to stay in the market for the long term.

Johnson, the daughter of Fidelity chairman Edward C. ''Ned'' Johnson III and the 19th wealthiest American, said investors would be making a mistake to abandon mutual funds now despite what she called ''the dramatic bursting of the stock market bubble.''

She argued that the average investor who holds funds in a retirement plan at work would have lost more in stocks during the bear market than in funds. One in five US stocks lost 60% of their value last year, she said, while only a relatively small number of mutual funds fell that sharply.

Johnson said mutual funds are likely to remain the main vehicle American workers use to build nest eggs, despite the rise in popularity of unregulated hedge funds and separate accounts for the wealthy.

''I believe mutual funds can compete very successfully with hedge funds and separate accounts,'' Johnson said before a conference of the Society of American Business Editors and Writers in Cambridge.

Mutual funds, she said, offer ''much stronger protections and regulatory oversight'' and chart lower fees.

Johnson, 41, became president of Fidelity's fund investment group in June 2001, succeeding longtime executive Robert Pozen, who is now a member of the Romney administration.

Johnson has taken on increasing responsibilities at the firm since she was hired in 1988, after earning her MBA, starting out as a stock analyst, and working her way up to fund manager and overseeing the firm's technology systems. She managed the firm's high-profile growth investing group before becoming president.

Johnson is a closely watched figure in the investment industry, as the executive being groomed to take over one day for her father, who is 72 and said to be in top health. Executives who know him say he has no intention of stepping down any time soon.

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