The Impact of Fidelity’s Acquisition Strategy on Market Share
Fidelity National Financial Inc (NYSE:FNF) recently submitted its SEC 10-K filing, detailing several operational and financial metrics. This filing demonstrates how its efficient costs management has contributed to industry-leading margins and profitability.
Recent studies have often treated prototype fidelity as a binary concept; our analysis suggests it should more appropriately be seen as a continuum.
Market Share
Fidelity Investments has made strides toward expanding their alternatives capabilities, amassing $14 billion of assets under management (AUM). While that figure might seem modest compared to rival firms managing multi-billion dollar AUM portfolios, Boston-based Fidelity is keeping busy adding assets.
Fidelity’s acquisition of Shoobx — an application that helps private companies streamline compliance related to incorporation and capital raising — adds another tool for startups and early stage firms, while further supporting Fidelity’s commitment to innovation.
Fidelity clients surveyed recently reported that, should the market experience a correction, three quarters would identify opportunities to invest more while 33% would choose to ride it out. 61% would move money into equity-related investments should it correct and six percent would take it out, according to Fidelity. Their goal is to be one of the “stickiest” partners for companies years before their public offerings take place, said she.
Growth
Fidelity executives outlined an ambitious growth strategy at their Investor Day presentation last week. Revenue is anticipated to expand 4%-4.45% this year before rising up to 5-5.5% by 2018, driven by growth across recurring business services, core, digital payments, tuck-in acquisitions and additional services revenue streams.
Fidelity Investments made expanding its alternatives capabilities a top priority, but despite purchasing several private credit assets in 2023 and hiring David Gaito – previously head of direct lending at PNC Bank’s $2 billion-plus business as head of direct lending – asset classes still represent only a minor portion of its $4.58 trillion assets under management. Ultimately, Fidelity decided that capitalizing on existing strengths – like high yield bonds, leveraged debt, and distressed assets – was best way forward.
Reputation
Fidelity as one of the world’s premier custodial platforms has an obligation to stay abreast of current RIA trends, and their partnership with Merchant is another step in that direction; permitting advisors using Fidelity WealthCentral platform access the eMoney Advisor PFM tools (and potentially receive discounts as a result) available via Merchant.
WealthscapeSM portal was also extended to offer research on third-party registered alternative investment strategies, with an objective and repeatable research process designed to assess them for people, strategy alignment, track record performance, investment terms and governance concerns.
Fidelity recently underwent a drastic restructure of their communications division, creating three teams and refining two others. Fidelity created three specific roles within this reorganization – executive office comms team for supporting CEO Abigail Johnson; policy and advocacy comms team designed to boost its standing in Washington DC; and centralized comms services team that will focus on written and creative content – this latter team was previously divided among multiple teams but is now led by SVP Huw Gilbert.
Strategy
Fidelity utilizes multiple strategies to expand its market share. These include increasing local presence and making regular research trips into countries in which it operates; additionally, Fidelity pays attention to fundamental economic information like interest rates and job market strength when making informed investment decisions.
Shoobx, an US-based firm offering automated equity management operations and financing software to private companies, will enhance Fidelity’s capabilities to serve start-ups – an expanding segment of the market.
Financial terms were not disclosed. Fidelity will use this acquisition to strengthen their portfolio of tools for startups and early-stage companies, expanding on what has already been offered through innovation labs and investments in fintech firms. They will also partner with resources like AWS Cloud Financial Management Talks which help streamline cloud financial processes.
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