It took Abigail Johnson 25 years to take charge at Fidelity Investments, the money manager controlled by her father. As she picks a new head for the firm’s asset management unit, her choice is likely to be a company veteran who rose through the ranks like she did.
Among the executives in line to succeed Ronald P. O’Hanley, who quit this week, are two former money managers: head of equities Brian Hogan and his fixed-income counterpart, Charles Morrison; and an operations leader, Jacques Perold. Each has been with Fidelity for at least 20 years.
Johnson has told employees that O’Hanley, who was hired by her father in 2010, will be replaced by an internal successor when he departs at the end of February. While the money-management arm has lost ground to rivals such as Vanguard Group Inc. and BlackRock Inc. in recent years, Johnson has so far continued the path set by her father Edward C. “Ned” Johnson III, who shifted emphasis to the retirement and brokerage businesses from asset management.
“The fact that they said up-front they would hire internally speaks volumes about their confidence in Fidelity’s culture, which has been tested in the last 10 years,” James Lowell, editor of Fidelity Investor, a newsletter based in Needham, Massachusetts, said in a telephone interview.
Vincent Loporchio, a spokesman, said Fidelity wouldn’t make Hogan, Morrison or Perold available for interviews.
O’Hanley, 56, was a rare outside hire for a top executive position when he came aboard from Bank of New York Mellon Corp., where he also led the money-management unit. He joined as Fidelity, whose funds were primary built around the stock-picking skills of its fund managers, struggled to cope with the impact of the 2008 financial crisis and the surging popularity of index-based investing.
Lowell and another Fidelity watcher, John Bonnanzio, said the selection of a successor will lie chiefly with Abigail Johnson, president of the family-owned firm since August 2012, allowing her to cement control. Abigail, a 52-year-old billionaire, has been gradually taking over from her father, who is still chairman and chief executive officer of the Boston-based firm.
Fidelity’s total assets under management rose to almost $1.9 trillion as of Oct. 31 from about $1.59 trillion at the end of 2010. Even so, the firm lost ground to faster-growing competitors including New York-based BlackRock and Vanguard in Valley Forge, Pennsylvania, whose low-cost index funds rose in popularity.
Hogan, who joined Fidelity in 1994 as a fixed-income analyst, has the shortest tenure of the three likely candidates. He switched to U.S. stocks in 1998, eventually running a series of funds until his promotion in 2006 to senior vice president of equity research and then president of that group.
In his most recent fund-management role, Hogan oversaw the Fidelity Blue Chip Value Fund (FBCVX) from June 2003 to September 2006, returning an annualized 15%, compared with 17% for the Russell 1000 Value Index, according to data compiled by Bloomberg.
Popular and respected by the investing teams at Fidelity, Hogan would be well-received internally as the new head of asset management, said Bonnanzio, editor of Fidelity Monitor & Insight, an investor newsletter based in Wellesley, Massachusetts.
“He’d have to be on that list given his responsibilities,” Bonnanzio said. “And money managers like bosses who used to manage money, and did well at it.”
Hogan graduated from James Madison University in 1986 and earned a master’s in business administration from the University of North Carolina at Chapel Hill.
While equities are Fidelity’s traditional strength, Lowell and Bonnanzio said Morrison can’t be counted out because of his bond background.
“Fixed income has been a tremendous success story for Fidelity and he’s someone who’s managed money and earned respect along the line,” Bonnanzio said.
Morrison joined Fidelity in 1987 as a bond analyst and became a mutual-fund manager in 1995, serving as part of the leadership group when Morningstar Inc. named Fidelity’s municipal-bond team as 2003’s fixed-income managers of the year. He has a bachelor’s degree from Dartmouth College and an MBA from Harvard Business School.
Lowell gave his best odds to Perold, the operations manager beneath O’Hanley.
He joined Fidelity in 1986 as an analyst, then held several posts in investment technology, trading and research. From 2001 to 2009, Perold was president and chief investment officer of Geode Capital Management, then Fidelity’s quantitative-investing unit. He was named chief operating officer of asset management in December 2012.
Perold has key experience in developing new products, Lowell said. He played a role in Fidelity’s push into exchange-traded funds that began last year, and earlier into vehicles that are tied to benchmarks with nontraditional weighting, known as enhanced index funds.
“He has the credibility, knows the culture and knows product development,” Lowell said.
Perold has bachelor’s and graduate degrees from the University of Cape Town in South Africa.
Other potential candidates, the two newsletter editors said, include Michael A. Jones, who runs Fidelity’s institutional-investing unit, Pyramis Global Advisors.
Check out Fidelity Asset Management Head Ron O’Hanley to Leave on ThinkAdvisor.