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Edward Johnson III, Fund Pioneer at Fidelity, Dies at 91

(Bloomberg) — Edward “Ned” Johnson III, who revolutionized the wealth-management industry by promoting mutual funds for retirement plans and money market checking accounts while head of Fidelity Investments, has died. He was 91 years old.

He died in Florida on March 23, according to Fidelity. No reason given. He was a resident of Wellington, Florida, according to the firm.

“He loved his family, his coworkers, work, the stock market, art and antiques, tennis, skiing, sailing, history and a good debate,” his daughter, Abigail Johnson, the firm’s chief executive officer since 2014, said. Post on LinkedIn. “They can be counted on to have an opposite view on anything.”

Ned Johnson was promoted to president in 1972 of the Boston-based firm his father founded after World War II, and he served as chief executive officer until 2014. During his tenure at the helm, assets grew from $3.9 billion to more than $2.1 trillion. , making Fidelity the second largest US mutual fund company.

The firm now led by his daughter had $11.1 trillion in assets under administration, including $4.2 trillion in discretionary assets, as of February. 28.

With investing visionaries such as Charles Schwab and Vanguard Group Inc founder John Bogle, the Ned Johnson wave of democratization and deregulation of the financial market emerged.

He pioneered the sale of mutual funds directly to individual investors rather than through brokers, and eliminated nearly all of the firm’s 8% sales fee. He introduced 401(k) retirement plan management, with Fidelity becoming the biggest player. He was the first to offer money market funds, which allowed customers to write checks directly competing with bank accounts. They promoted celebrity portfolio managers and offered low-fee index funds.

“He created the financial supermarket,” Fidelity superstar stockpicker Peter Lynch said in a 2019 interview in the 1980s. “He was like a juggler with 20 balls in the air. I don’t know how he did that.”

According to the Bloomberg Billionaires Index, Ned Johnson has a net worth of $13.6 billion. According to a regulatory filing, the bulk of his fortune was derived from his 12% stake in the adjacent company.

pawn cross

Fidelity was the world’s largest mutual-fund manager for more than two decades until 2010, when it was overtaken by Vanguard, which benefited from investor demand for low-fee passively managed index funds.

Edward Crosby Johnson III was born in the Boston suburb of Milton on June 29, 1930, to Edward Johnson II and Elsie Livingston Johnson. His father was a corporate attorney at Ropes, Grey, Boyden & Perkins, which became Ropes & Grey. He took over management of the $3 million Fidelity Fund in 1943, and three years later founded the Fidelity Management and Research Company to serve as its investment advisor.

After graduating from Harvard University in 1954 and serving in the US military for two years, Johnson joined Fidelity in 1957 as an analyst.

“I wasn’t sure if I’d find the investment business interesting,” Johnson wrote in a 1996 magazine article, “Adventures of a Contrarian.” “My father instilled in me a healthy respect for the market—an honor that came from his own experience of watching an entire generation lose money in the late 1920s and 1930s. As a child, I knew That you don’t have to play with the market, in the same way I didn’t know how to play matches unless you know what you’re doing.”

Magellan led

He became the first manager of Fidelity’s flagship fund, Magellan, in 1963, which he ran until 1971, beating the Standard & Poor’s 500 by an annual average of 22 percentage points. Under Lynch, Magellan became one of the largest and most successful mutual funds in the world, running it from 1977 to 1990.

Johnson inspired Fidelity to diversify from its core mutual funds into employee-benefit services, discount stock brokerage, and institutional fund management. Johnson led Fidelity to invest in less liquid assets, including real estate and biotechnology startups. Fidelity served over 35 million individual investors, 25,500 commercial retirement benefit plans and 13,500 financial advisory firms as of December 31, 2020.

Johnson was a student of the Japanese concept of “kaizen”, or achieving perfection through continuous improvement, which he found restless in his company.

“Fidelity’s biggest challenge these days is not to fight for survival; It is fighting against obesity,” he wrote in 1996.

attention to detail

He was known for his attention to detail and a self-critical approach. A collector of ancient Japanese, Chinese, and Colonial American wooden furniture, he would take out a pocket penlight during museum visits, Lynch said, and used displays to examine the joinery and learn how things fit together. Opens the drawers.

“Here’s a guy who comes up with a new idea every three hours,” said Lynch, who served as Fidelity’s vice president after retiring from Magellan. “He’s willing to try things. Some work and some don’t. If they don’t work, we say goodbye.”

Johnson had a “passion for privacy and a preference for behind-the-scenes maneuvers and face-to-face meetings,” says Diana B. Henriques wrote in his 1995 book, “Fidelity’s World,” a reluctance to stand in the spotlight that his daughter inherited.

Abigail Johnson joined Fidelity in 1988 as a fund manager and quickly moved up the ranks to run investment management and retirement benefits.

Moody’s Criticism

Ned Johnson, who had not publicly disclosed a clear succession plan, was criticized in 2007 by rating company Moody’s Investors Service, stating that “the level of control exercised by Mr. There are growing concerns about independent checks on his control.”

In 2010, Fidelity split the top management roles at the company between Abigail Johnson, who oversaw all customer and customer-focused businesses, as president of the personal, workplace and institutional unit, and Ronald O’Hanley, who served as the chairman of asset management. led. O’Hanley left to join rival State Street Corp. In 2014, before Abigail Johnson was promoted to CEO.

Abigail Johnson led Fidelity to introduce the first zero-fee exchange-traded fund in 2018. It also launched a cryptocurrency management unit for hedge funds, family offices, and trading firms.

In a 2018 Bloomberg interview, Abigail Johnson said of her father, “He was famous for being a contrarian, and I think that probably took a toll on me.” “I’m not afraid to have a different point of view. He was incredibly inquisitive to everyone all the time. I have a tendency to do what people tell me. Is it genetic or does it come from the fact that we managers I was both an analyst and a fund manager before I became one, I don’t know.”

His younger brother, Edward C. Johnson IV, worked at Fidelity’s real estate arm, Pembroke Real Estate, since its founding in 1997 and was later named president. Ned Johnson had another daughter, Elizabeth.

In addition to his three children, he is survived by his wife, Elizabeth, better known as Lily, and seven grandchildren.

— With assistance from Annie Massa.

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