Fidelity Operating Income Rose 13% in 2011

Fidelity Investments, the second- largest U.S. mutual fund company, said its operating income rose 13 percent last year as the average value of its equities under management increased and the firm held costs in check.

Earnings climbed to $3.33 billion from $2.95 billion a year earlier, the Boston-based asset manager said today in an e- mailed statement. Revenue increased by 3.3 percent to $12.8 billion even as assets under management decreased by 4.5 percent to $1.52 trillion.

“Against a backdrop of market volatility, Fidelity posted solid results in 2011,” Edward C. Johnson III, chairman and chief executive officer, said in the statement.

Fidelity, which lost the top spot among mutual fund managers to Valley Forge, Pennsylvania-based Vanguard Group Inc. in 2010, said the growth in income was driven by higher equity assets and by efforts to control spending. Stock funds typically charge clients more than bond and money market funds.

Average equity assets increased 10 percent, according to Fidelity. The mean value of the Standard & Poor’s 500 Index (SPX) was 11 percent higher in 2011 than in 2010, even as the benchmark for large U.S. stocks ended the year almost unchanged.

Fidelity’s expenses grew by less than 1 percent last year, the firm said.

The amount of money investors withdrew from Fidelity funds and other products fell to a net $36.3 billion from $49.4 billion in 2010. Clients pulled $46.1 billion from equity products and $16.1 billion from money market products, the company said.

Money Funds Suffer

Redemptions from Fidelity’s stock and bond mutual funds in 2011 totaled $28 billion, according to data compiled by fund research firm Morningstar Inc. (MORN)

Low interest rates and a shrunken supply of eligible securities continued to hurt money market mutual funds in 2011. Managers have lowered fees to keep customers’ returns above zero. Fidelity is the largest manager of money market mutual funds, with $419 billion in assets as of Jan. 31, according to Crane Data LLC.

Closely held Fidelity didn’t report net income based on generally accepted accounting principles.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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