It owns a chunk of both Warner Music Group and Universal Music Group. But what is Fidelity Investments?

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One of the US’s most prominent brokerages has quietly become a major shareholder in two of the big three global music recording companies over the past few years.

Boston-headquartered Fidelity Investments, the second-largest brokerage in the US, has snapped up around $1.125 billion worth of shares in Universal Music Group, the world’s largest music rights holder, and about USD $450 million-worth of shares in Warner Music Group, the third-largest rights holder.

Fidelity made the lion’s share of its investment in WMG in 2021 or early 2022.

According to filings with the US Securities and Exchange Commission (SEC), analyzed by MBW, Fidelity owned 12.42% of Warner Music Group (WMG)’s Class A shares as of the start of 2023.

That translated to around 3.3% of the total value of Warner (including B shares).

Fidelity’s 17.18 million shares in WMG, as declared to the SEC in February, is currently worth around $450 million, based on Warner’s stock price today (May 22).

Fidelity held a similar amount of shares in 2021, according to SEC filings related to that year.

As of November 2022, Fidelity also owned 3.02% of Universal Music Group, according to the company’s latest (2022) annual report, which bases its data on filings with the Dutch Financial Markets Authority (UMG trades on the Amsterdam Stock Exchange).

Fidelity wasn’t mentioned in UMG’s 2021 annual report, indicating that Fidelity’s share of the company’s outstanding stocks would have been below 3% prior to that.

Fidelity’s holdings of approximately 54.8 million shares of UMG is worth around €1.05 billion ($1.14 billion) as of today (May 22).

However, Fidelity’s overall holdings are so large – they had $4.2 trillion in assets under management (AUM) as of last count – that their holdings of UMG and WMG amount to a very small fraction of its portfolios.

In fact, neither company appears in the top 10 holdings of Fidelity’s mutual funds.

What is Fidelity?

Fidelity is the US’s second-largest brokerage. Its $4.2 trillion in AUM is behind only Charles Schwab, with $7.6 trillion.

Unlike most of the US’s major brokerages, which are either publicly traded companies or subsidiaries of publicly traded companies, Fidelity is essentially a family business.

While 51% of the company is employee-owned, the remaining 49% is owned by the Johnson family, the descendants of Edward C. Johnson II, the Boston lawyer and businessman who bought the Fidelity Fund, an early mutual fund, in 1943.

Johnson was a “Boston Brahmin” – a term coined by author Oliver Wendell Holmes, Sr., in the 1860s, to describe the city’s upper class. (Other members of this group include founding fathers Samuel Adams and John Adams, as well as presidents Calvin Coolidge and Franklin Delano Roosevelt. Bill Gates is a descendant.)

“Don’t doubt yourself. Keep at it, stay looking ahead, stay committed and stay true to yourself.”

Abigail Johnson, Fidelity Investments

The Fidelity Fund had been set up in Boston in 1930, in the midst of the Great Depression, and for a time, it had no competition in Massachusetts. Because of the collapse of banks following the stock market crash of 1929, it was the only fund licensed by the state’s securities director.

After Johnson bought the fund in 1943 – when it had $3 million in AUM – he launched Fidelity Management and Research Company (FMR), to act as an advisor to the fund.

FMR would eventually come to be known as Fidelity Investments, and over the coming decades, it would launch numerous mutual funds, spin off an international division (Fidelity International), and expand from stock funds into money market funds and municipal bond funds.

In the 1970s, following deregulation of the sector, Fidelity became the first institution in the US to offer discount brokerage services.

Today, Fidelity has 38.2 million retail accounts, plus 42.2 million participants in its workplace plans.

A significant chunk of US households save and invest through the company. And it’s still run out of Boston, rather than New York.

Today the company is run by Abigail Johnson, granddaughter of Edward C. Johnson II. She’s been President and CEO of Fidelity since 2014.

In a 2020 interview with Forbes, Johnson — whose net worth is estimated by Forbes to be $21.6 billion — said growing up in one of the US’s most successful families endowed her with “a relentless focus on continuing to try to improve everything you do.”

She offered some insight into her business philosophy, saying: “Don’t assume that the answers are out there in the form of somebody else already doing something. Sometimes they are, but you have to think beyond that, you have to think that the … right answer for you and your organization might not be something that’s been done before. And it’s up to you to discover and work with your team to form and figure out how to do [that] successfully.”

Asked what the best piece of advice was she ever received on navigating career and family, Johnson said: “Trust your instincts. Lots of people will give you advice and depending upon how well they know you, the advice might be valid or not so valid, but at the end of the day you know yourself best and you know what will work for you….

“Don’t doubt yourself. Keep at it, stay looking ahead, stay committed and stay true to yourself.”Music Business Worldwide