More bad news for Fidelity Investments. On Friday, Moody's revised its outlook on the Boston-based investment behemoth from stable to negative. According to the ratings service, the outlook change reflects the "erosion of the company's market share in long-term mutual fund assets under management, the growing prominence of lower-margin businesses in its overall business profile and increasing risk from non-core investment activities."
Moody’s notes Fidelity is facing these pressures with higher leverage than that of its asset management peers.
"Today's outlook change reflects the relatively weak performance of Fidelity's equities funds, which has led to a loss of market share," Moody’s vice president Dagmar Silva said in a statement. "And while the company has leading market positions in retail brokerage and defined contribution plans, these businesses have lower margins than its asset management businesses."
A Fidelity representative took issue with Moody's report, and highlighted the company's successes during the past year.
"Our business continues to grow and our operating income in 2010 increased by 17%, from $2.5 billion in 2009 to more than $2.9 billion last year," Fidelity spokesman Vin Loporchio wrote in an e-mail. "2010 was one of the best years in our history. Our balance sheet is strong and we continue to invest significantly to further develop our businesses."
He claimed the release has absolutely no impact on the company's business strategy or the services it delivers.
"Fidelity is an industry leader that is healthy and well-positioned for the future; the firm is positioned exceptionally well with our unique and diverse business lines, strong brand and reputation, sound risk management practices, clear strategic direction, willingness to invest for the future, and commitment to financial strength," according to Lorporchio. "We hold a leadership position in the financial services industry and across multiple business lines.