Fidelity's Abigail Johnson Gains CEO Title from Her Father

Abigail Johnson has taken another big step toward being the next leader of Fidelity Investments after the company said she will add the title of chief executive to her duties.

Johnson already had day-to-day control over operations that include mutual funds, an online brokerage and the biggest U.S. administrator of 401(k) retirement plans.

Over the past decade, Boston-based Fidelity, which had managed assets of $2 trillion at the end of August, has ceded its once-powerhouse status to Vanguard Group as its actively managed mutual funds have become less appealing to investors focused on lower-cost index funds and exchange-traded funds.

Johnson, 52, will continue to report to her 84-year-old father, Edward C. Johnson III, Boston-based Fidelity's chairman. The elder Johnson had been chairman and CEO of the company since taking over from his father in 1977. The announcement was contained in a memo distributed on Monday to employees.

"Abby Johnson has agreed to become chief executive officer of Fidelity, reflecting a further step forward in our leadership succession plan," according to a Fidelity memo from the elder Johnson viewed by Reuters. "Abby will retain her role of president and I will continue to serve as chairman of the board."

Fidelity is the second-largest U.S. mutual fund company behind Vanguard. It is best known for its stable of actively managed mutual funds including the $100 billion-plus Contrafund .

Vanguard's low-cost approach, however, has been the clear winner in recent years. Over the past year, for example, net deposits into Vanguard funds have totaled $171 billion, as of Aug. 31, according to Morningstar Inc.

In contrast, Fidelity had net withdrawals of nearly $19 billion from actively managed funds during the same period. Net deposits into Fidelity passive funds totaled about $9 billion, according to Morningstar.

"As we have noted in the past, a major source of Fidelity's outflows during the past year has been conversions to collective investment trusts," Morningstar analysts wrote recently. "However, it is surprising that these outflows are not being offset by organic inflows."

Abby Johnson, as she is known inside the company, worked summers at her family's firm before college. She graduated from Hobart and William Smith Colleges in Geneva, New York, with a degree in art history. She worked for two years after graduation at consulting firm Booz Allen.

She then obtained an MBA from Harvard Business School before joining Fidelity as an analyst in 1988. In the 1990s, she ran three different stock funds before moving into management. In 2001, she was named president of the fund division and in 2005 she switched jobs to take charge of Fidelity's benefits and retirement plans unit.

It wasn't until recently that her place as heir apparent to her father was truly secure. That happened in 2012 when she was promoted to run all of the company's main businesses, ending years of speculation about who would succeed Edward "Ned" Johnson.

(Reporting By Tim McLaughlin; Editing by Meredith Mazzilli)