One of the largest brokerage houses in the United States has quietly become a major shareholder in two of the world’s Big Three music recording companies in recent years.
Boston-headquartered Fidelity Investments, the second-largest brokerage in the United States, has pulled itself together $1.125 billion value of shares in Universal Music Grouplargest music rights holder in the world, and about US$450 million-value of shares in Warner Music Groupthe third rights holder.
Fidelity carved out the lion’s share of its investment in WMG in 2021 or early 2022.
According to documents filed with the United States Securities and Exchange Commission (SEC), analyzed by MBWproperty of Fidelity 12.42% Class A shares of Warner Music Group (WMG) from early 2023.
This resulted in approximately 3.3% of the total value of Warner (including the B shares).
Faithfulness 17.18 million WMG shares, as reported to the SEC in February, are currently worth approximately $450 millionbased on Warner’s share price today (May 22).
Fidelity held a similar number of shares in 2021, according to SEC filings relating to that year.
As of November 2022, Fidelity also owned 3.02% of Universal Music Group, according to the the latest annual report (2022) of the companywhich bases its data on filings with the Dutch Financial Markets Authority (UMG trades on the Amsterdam Stock Exchange).
Fidelity was not mentioned in UMG’s 2021 annual report, indicating that Fidelity’s share of the company’s outstanding stock would have been lower 3% before that.
Fidelity’s holdings of approximately 54.8 million of UMG is worth approximately 1.05 billion euros ($1.14 billion) starting today (May 22).
However, Fidelity’s global holdings are so large that they had $4.2 trillion in assets under management (AUM) at last count – that their holdings in UMG and WMG represent a very small fraction of his portfolios.
In fact, neither company appears in the top 10 holdings of Fidelity Mutual Funds.
What is Loyalty?
Fidelity is the second largest brokerage in the United States. It is $4.2 trillion in AUM is behind only Charles Schwab, with $7.6 trillion.
Unlike most large US brokerages, which are either publicly traded companies or subsidiaries of publicly traded companies, Fidelity is essentially a family business.
While 51% of the business is owned by the employees, the rest 49% is owned by the Johnson family, descendants of Edward C. Johnson II, the Boston lawyer and businessman who purchased 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, and Presidents Calvin Coolidge and Franklin Delano Roosevelt. Bill Gates is a descendant.)
“Don’t doubt yourself. Keep going, stay forward-looking, stay committed, and stay true to yourself.
Abigail Johnson, Fidelity Investments
The Fidelity Fund had been established in Boston in 1930, in the midst of the Great Depression, and for a time had no competition in Massachusetts. Due to the collapse of the banks following the stock market crash of 1929, it was the only fund authorized by the state director of securities.
After Johnson bought the fund in 1943 – when he 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 many mutual funds, create an international division (Fidelity International), and move from equity funds to money market funds and to municipal bond funds.
In the 1970s, following the deregulation of the industry, Fidelity became the first institution in the United States to offer discount brokerage services.
Today, Fidelity has 38.2 million retail accounts, plus 42.2 million participants in its business plans.
A significant portion of US households save and invest through the company. And it’s still in Boston, rather than New York.
Today the company is run by Abigail Johnson, granddaughter of Edward C. Johnson II. She has been President and CEO of Fidelity since 2014.
In a 2020 interview with ForbesJohnson — whose net worth is estimated by Forbes be $21.6 billion – said growing up in one of America’s most successful families endowed her with “a relentless focus on pursuing the improvement of everything you do.”
She gave insight into her business philosophy, saying, “Don’t assume the answers exist in the form of someone 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 train and understand how to do it. [that] with success.”
When asked what was the best advice she had ever received for navigating her career and her family, Johnson replied, “Trust your instincts. Lots of people will give you advice and depending on how they know you the advice may or may not be so valid, but in the end you know yourself better and you know what will work for you….
“Don’t doubt yourself. Keep going, stay forward-looking, stay committed, and stay true to yourself.The music industry around the world