The law would not prevent purchases of stock owned by an affiliated entity after an IPO, in the open market. But Fidelity said it applies its own guidelines, which prevent such purchases when there is a "substantial" level of ownership by F-Prime. The guidelines are meant to address potential conflicts of interest and questions of fairness for investors in Fidelity mutual funds, the company said.
John Bonnanzio, an editor at Fidelity Monitor & Insights, which makes independent recommendations on Fidelity funds, said the Johnson-led venture investing has been a good way to reward and retain star portfolio managers such as Danoff.
"Hedge funds have siphoned off a lot of good portfolio managers from mutual fund companies," Bonnanzio said.
HEIR APPARENT
Founded in 1946 by Abigail Johnson's grandfather, Edward Johnson II, Fidelity's mutual fund business manages $1.2 trillion in assets. Privately held Fidelity is still controlled by the family and has been the linchpin of their fortune. The clan's net worth is estimated at $26 billion by Forbes magazine, making them the 9th-richest family in the United States.
The founder eventually turned the reins over to his son, Fidelity's chairman, Edward "Ned" Johnson III, who is now 86. Today, Abigail Johnson, 54, is heir apparent. The oldest of Ned's three children, Abigail spent her career preparing for the top job, starting at Fidelity as an intern before moving on to portfolio manager and now CEO. She lives in the home once owned by her grandfather.
Abigail and her younger siblings, Elizabeth and Edward Johnson IV, are investors in F-Prime Capital, according to disclosures by the venture fund.
The family's private investments sometimes dovetail with members' personal interests. In 1985, Ned Johnson used venture funding to launch a limousine service after it took too long to hail a taxi at Boston's airport, according to accounts in the Boston Globe. Abigail Johnson's husband, Christopher McKown, co-founded a healthcare start-up, Iora Health, that has received multiple rounds of investment from F-Prime.
OPPORTUNITY COSTS
Over the years, F-Prime and other venture investing entities have generated billions of dollars in gains for the family and company insiders, according to financial disclosures made by Fidelity.