Edward Johnson III, fund pioneer at Fidelity, dies at 91

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

He died March 23 in Florida, according to Fidelity. No cause was given. He resided in Wellington, Florida, according to the firm.

“He loved his family, colleagues, work, the stock market, art and antiques, tennis, skiing, sailing, history and a good debate,” wrote his daughter, Abigail Johnson, chief executive. company since 2014, in a statement. LinkedIn position. “He could be counted on to have a contrary point of view on just about anything.”

Ned Johnson was promoted in 1972 to chairman of the Boston-based company his father founded after World War II, and he served as chief executive until 2014. During his tenure at the top, assets grew jumped to over $2.1 trillion from $3.9 billion. , making Fidelity the second largest mutual fund company in the United States.

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

Along with visionaries like Charles Schwab and John Bogle, founder of Vanguard Group Inc., Ned Johnson rode the wave of democratization and deregulation of financial markets.

He pioneered the sale of mutual funds directly to individual investors rather than through brokers and abolished nearly all of the company’s 8% sales charge. It introduced the management of 401(k) retirement plans, in which Fidelity became the biggest player. It was the first to offer money market funds allowing customers to issue checks, in direct competition with bank accounts. He encouraged celebrity portfolio managers and offered low-fee index funds.

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

Ned Johnson has amassed a net worth of $13.6 billion, according to the Bloomberg Billionaires Index. The bulk of his fortune came from his 12% stake in the private company, according to a regulatory filing.

The avant-garde surpasses

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 passively managed index funds at low cost.

Edward Crosby Johnson III was born to Edward Johnson II and Elsie Livingston Johnson on June 29, 1930 in the affluent Boston suburb of Milton. His father was a corporate lawyer with Ropes, Gray, Boyden & Perkins, now Ropes & Gray. He took over management of the $3 million Fidelity Fund in 1943 and three years later founded Fidelity Management & Research Co. to act as an investment adviser.

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

“I wasn’t sure I found the investment activity interesting,” Johnson wrote in a 1996 magazine article, “Adventures of a Contrarian.” “My father had given me a healthy respect for the market – a respect that came from his own experience watching an entire generation lose money in the late 1920s and 1930s. not to play with the market, the same way I knew not to play with matches, unless you knew what you were doing.

Led Magellan

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. Magellan became one of the largest and most successful mutual funds in the world under Lynch, who led it from 1977 to 1990.

Johnson pushed Fidelity to diversify its core mutual funds into employee benefits services, discount stock brokerage and institutional fund management. Johnson led Fidelity to invest in less liquid assets, including real estate and biotech startups. Fidelity served more than 35 million individual investors, 25,500 corporate pension 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 relentlessly pushed in his business.

“Fidelity’s biggest challenge these days isn’t fighting for survival; it’s fighting obesity,” he wrote in 1996.

Attention to detail

He was known for his attention to detail and his self-critical approach. A collector of antique Japanese, Chinese and colonial American wooden furniture, he would pull out a pocket penlight when visiting museums, Lynch said, and open drawers in exhibits to examine the millwork and learn how things fit together.

“Here’s a guy who comes up with a new idea every three hours,” said Lynch, who served as vice chairman of Fidelity after retiring from Magellan. “He is ready 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 maneuvering and one-on-one encounters,” Diana B. Henriques wrote in her 1995 book, “Fidelity’s World,” a reluctance to stand in the spotlight that her daughter inherited.

Abigail Johnson joined Fidelity in 1988 as a fund manager and quickly rose through the ranks, managing investment management and retirement benefits.

Moody’s review

Ned Johnson, who had not publicly disclosed a clear succession plan, was criticized in 2007 by ratings firm Moody’s Investors Service, which said it had “growing concerns about the level of control exercised by Mr. Johnson and the extent to which there are checks on his control.

In 2010, Fidelity split the company’s leadership roles between Abigail Johnson, who oversaw all client and client-focused activities as president of the personal, professional and institutional unit, and Ronald O’Hanley, who ran asset management. 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 no-fee exchange-traded fund in 2018. She also launched a cryptocurrency management unit for hedge funds, family offices and trading firms.

“He was famous for being contrarian, and I think that probably rubbed off on me,” Abigail Johnson said of her father in a 2018 Bloomberg. maintenance. “I’m not afraid to have a different point of view. He was incredibly curious about everyone all the time. From what people tell me, I tend to do the same thing. Whether it’s genetic or whether it comes from the fact that we were both analysts and fund managers before becoming managers, I don’t know.

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

Besides his three children, he is survived by his wife, Elizabeth, known as Lillie, and seven grandchildren.

–With the help of Annie Massa.

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