The mutual fund giant Fidelity Investments, founded seven decades ago and run ever since by the Johnson family, has won the trust of tens of millions of investors.

The company's tradition of putting clients' interests "before our own is a big part of what makes Fidelity special," the fund firm says in its mission statement.

In at least one lucrative field, however, the Johnson family's interests come first. A private venture capital arm run on behalf of the Johnsons, F-Prime Capital Partners, competes directly with the stable of Fidelity mutual funds in which the public invests. It's an arrangement that securities lawyers say poses an unusual conflict of interest.

That conflict can be seen in the case of Ultragenyx Pharmaceutical Inc, a promising biotech start-up. In 2011 and 2012, the Johnsons' F-Prime Capital invested a total of $11 million on Ultragenyx before the start-up made an initial public offering of its stock.

The pre-IPO investment effectively prevented Fidelity mutual funds from making the same play. If both the private fund and Fidelity's ordinary funds had invested, they would have violated U.S. securities laws, which prohibit affiliated entities from buying substantial stakes in the same companies at the same time.

The managers of Fidelity's public funds eventually did purchase Ultragenyx shares, but not until after the stock price skyrocketed in the firm's January 2014 initial public offering. The Fidelity funds bought about 1.1 million Ultragenyx shares in the second quarter of 2014. The average price for the stock was $41.17 during that three-month period - 12 times higher than the $3.55 a share paid by F-Prime Capital.

By the end of June 2014, the Johnson family and an elite circle of Fidelity insiders were sitting on a gain of $128 million - or about 1,000 percent - on the Ultragenyx investment. Several of Fidelity's mutual fund rivals, including American Funds and BlackRock Inc, did just as well or better on the Ultragenyx play by investing at about the same time as the Johnsons, U.S. regulatory filings show.

Fidelity declined to comment on the specific investments examined by Reuters and declined to detail how it balances the interests of Fidelity funds and the Johnsons' F-Prime funds in cases where they might compete for the same investment.

Fidelity's chief executive, Abigail Johnson, declined to comment for this story.

Yale University law professor John Morley said Fidelity runs the risk of losing investors by competing with the funds that serve them.