May 3 (Bloomberg) -- Fidelity Investments named Abigail Johnson to run its retirement services business to expand the background of the executive widely expected to succeed her father as leader of the world's largest mutual fund company.

``For some time, we have talked about broadening her experience level,'' Robert Reynolds, vice chairman of the Boston- based company, said in an interview last night.

Johnson, 43, previously ran the company's investment management unit. Her father, 74-year-old Edward C. Johnson III, is Fidelity's chairman and chief executive.

The younger Johnson has moved up through the ranks since joining the company in 1988, and is widely viewed as being groomed for the top job. She had mixed success in her four years managing the investment unit, Fidelity Research & Management Co., as competition and regulatory scrutiny increased.

Fidelity fell to third last month in long-term mutual fund assets among U.S. companies, according to Financial Research Corp. American Funds, a unit of Los Angeles-based Capital Group Cos., had $671.8 billion in long-term assets, compared with Fidelity's $667.2 billion. Vanguard Group, based in Valley Forge, Pennsylvania, remained the largest U.S. fund manager with $713.5 billion in stock and bond fund assets.

When money-market funds are included, Fidelity is the largest fund manager.

No Fines

Unlike New York-based Alliance Capital Management Holding LP and Putnam Investments of Boston, Fidelity hasn't been hit with large fines by regulators investigating improper mutual fund trading. Still, probes by the U.S. Securities and Exchange Commission and the NASD into gifts from outside brokers to its equity traders led Fidelity to discipline 14 employees. Five traders have left Fidelity since December.

Reynolds said Abigail Johnson was supposed to serve three years at the investment unit, so her new assignment was overdue. ``We missed it by a year,'' he said.

Previously, Johnson managed several mutual funds, led two stock management teams and was associate director of the investment business.

``If I were in Mr. Johnson's shoes, I would want my daughter to get a handle on all parts of the business,'' said Geoff Bobroff, an industry consultant in East Greenwich, Rhode Island. ``This is a good move for Abby.''

Abigail Johnson is the largest shareholder of closely held Fidelity with 24.5 percent of its voting stock. Ned Johnson holds 12 percent, while about 50 executives control 51 percent.

Growth Cited

Ned Johnson, one-time manager of the flagship Fidelity Magellan Fund, became chief executive in 1972. He didn't mention his daughter in a statement released last night, saying only that after significant growth in the past decade, the reorganization will help the company ``improve on what we do, in terms of efficiency, service to our customers and overall performance.''

His daughter was named president of Fidelity Employee Services Co., which provides pension, benefit and payroll services to large companies. The unit has 10,000 employees and oversees 43 percent of the company's $1.1 trillion in assets. Fidelity has said it is its fast-growing unit, though it hasn't disclosed revenue.

Fidelity's chief financial officer, Stephen Jonas, succeeds Johnson at the investment unit, where he was named executive director, reporting to Reynolds. Jonas, an 18-year Fidelity veteran, had been president of Fidelity enterprise operations and risk services. In that role, he was in charge of pricing and cash management, processing, compliance and Fidelity's India operations, among other functions.

Institutional Unit

He will oversee Dwight Churchill, head of equity portfolio management; Boyce Greer, head of equity research and asset allocation; and Walter Donovan, who will oversee high-income, fixed-income and global equity trading, the company said in the statement.

Johnson's reassignment follows Fidelity's announcement in March that it will form a new institutional-investment division. Peter Smail, whom Abigail Johnson is replacing in the employee- service division, will lead the new company, known as Fidelity Institutional Asset Management Group.

Smail, who joined Fidelity in 1987, had headed the unit for five years. He will work with Johnson over the next 60 days to aid her transition to the employee-services group, Fidelity said. The company, also known as FMR Corp., had net income of $1.1 billion in 2004, up 23 percent from $907.5 million in 2003. Revenue rose 14 percent to $10.5 billion from $9.2 billion.

Fidelity was founded in 1946 by Edward C. Johnson II, Ned's father and Abigail's grandfather.

To contact the reporter on this story: Matthew Keenan in Boston at mkeenan6@bloomberg.net.

Last Updated: May 3, 2005 00:52 EDT