Finance: MUTUAL FUNDS
THE DAUGHTER ALSO RISES
It's an unusual way to groom a future CEO. At Fidelity Investments, the boss's daughter manages the $1.9 billion Fidelity OTC Portfolio, an assignment that has virtually no relation to the day-to-day operations of her family's sprawling financial-services empire. "It's a full-time job, plus," says 33-year-old Abigail P. Johnson, adding that when she's not working 11-hour days running the fund, she's home in the Boston suburbs taking care of her 4-month-old daughter, Julia. "I don't have time to go messing around in other departments," she says.
Perhaps not now. But it's looking increasingly likely that Abby--who shares her 65-year-old father Edward C. "Ned" Johnson III's interests in art, skiing, and, of course, mutual funds--will eventually succeed him as chairman of the nation's largest mutual-fund firm. Johnson isn't saying when he plans to step down, but he clearly wants his daughter to have first crack at his job. Last year, he quietly gave her a 24% voting stake in Fidelity's parent, FMR Corp., an amount equal to his own. He also made her a director of FMR. If the changes result in her taking over Fidelity, she'll oversee a family fortune worth more than $5 billion, according to industry estimates.
Does Abby want the job? In her first interview since taking on her new responsibilities, Abby gave an answer that continues a Johnson tradition of being vague about the company's affairs: Between giggles and a blush prompted by the question of whether she wants to succeed her father, she says: "I really don't know. It's hard to predict what's going to happen." She says she's going to run the otc Portfolio for the foreseeable future.
Nonetheless, she now has more on her plate than most of her fellow fund managers. As a director, she's one of six confidants of her father who oversee Fidelity's complex web of 48 companies, which generated $3.5 billion in revenue and $315 million in net operating income last year and range from a global financial-services complex to an art gallery and a newspaper chain. "I participate in some discussion of overall corporate policy and big-picture strategic issues," Abby says.
RUNNING ON INSTINCT. Yet her position does not give her a say in managing the firm's day-to-day affairs. That's handled by a seven-man operating committee, headed by her father, on which she does not serve. Nor could she use her voting stock to contest her father's power. Ned holds sway over an additional 32% in family-owned stock.
Abby suggests the director's job and the stock came with no strings attached. "It was really just for traditional estate-planning purposes," she says. Her sister, Elizabeth, 32, and brother, Edward IV, 30, have shown little interest in working at Fidelity. "Naturally, since I'm the one here and working, it made sense for me to participate," she says.
Ned Johnson doesn't clear up matters about his daughter's future role. "I'm pleased she's interested in the business, but only time will tell what her future role might be," he says. "My goal is to have the best-qualified person run the company in the future." His current succession plan, which would kick in only if he met an untimely death, would have Fidelity run by a committee of unnamed senior managers--presumably members of the FMR board and operating committee--though control would remain in the family. The committee would be charged with finding a new chairman.
Johnson's resume hardly speaks of someone prepared to manage a widely diversified, multibillion-dollar corporation any time soon (table). But she's following the Johnson tradition. Both her father and grandfather--who founded Fidelity in 1946--started out managing money. Both were star investors in their day--Johnson III produced a 104% gain running Fidelity Magellan Fund in 1967. And neither had experience managing large companies, so they ran Fidelity largely on instinct--something Abby may have to do as well. "I have no idea how she is at managing people or whether she's shown an interest in other parts of the company" other than fund management, says A. Michael Lipper, president of Lipper Analytical Services Inc., a leading data provider and consultant to the mutual-fund industry.
FAMILY RESERVE. How's Abby as a fund manager? This year, she has been among Fidelity's top managers. The OTC Portfolio is up 25.2% through June 30, vs. 24.1% for the NASDAQ composite index. Among Fidelity's growth funds, OTC ranks fourth, slightly behind Magellan.
Johnson earned that record by restructuring the flagging OTC Portfolio when she took it over in April, 1994. The fund had 15% of its assets in cash and another large chunk of assets in listed stocks, which are not a significant part of the fund's charter. She sharply cut back on the cash and loaded up on technology (table)--just like many of her fellow Fidelity managers--and that has paid off handsomely. In her previous assignment, the Fidelity Dividend Growth Fund, she was up 18.3% in her 11-month tenure, almost doubling the performance of the average growth fund during that period.
That's impressive, and it could help her within the company if she takes the reins. It's also possible that she could eventually take the chairman's job but leave daily operations to others. Clearly, the whole discussion makes the Johnsons--a close but low-key family--uneasy. "We're essentially private people--quiet, normal folks," she says. "We don't lead a big, fancy lifestyle, and we're not really excited about having the spotlight on us." But when your company manages $313 billion of other people's money, that spotlight is hard to avoid.
B.A., 1984, Hobart and William Smith Colleges
MBA, 1988, Harvard
Portfolio manager, Fidelity
OTC, April '94 to present
Fidelity Dividend Growth,
Apr. '93-Apr. '94
Fidelity Sel. Dev. Communications, June '91-Jan. '93
Fidelity Sel. Telecommunications, June '91-May '92
Fidelity Sel. Industrial Equipment, Oct. '88-Aug '91
Director, FMR Corp, May '94 to present, 24% voting stake
Research analyst, Booz, Allen & Hamilton, '84-'86
TOP TEN HOLDINGS*
Wang Laboratories (New Delaware)
*APR.30, LATEST AVAILABLE DATA
DATA: FIDELITY OTC PORTFOLIO
FIDELITY OTC PORTFOLIO
Assets: By Geoffrey Smith in Boston