"What they're doing is not illegal, not even unethical," Morley said. "But it's entirely appropriate for mutual fund investors to take their money elsewhere because Fidelity has made a decision to take away some of their potential returns."
Alan Palmiter, a business law professor at Wake Forest University, called the arrangement more problematic because it directly pits the interests of Fidelity fund investors against those of Fidelity's owners and elite managers.
"It's hard to imagine a clearer corporate conflict of interest," Palmiter said.
SEC spokeswoman Judith Burns said the agency could not comment on a specific company.
Reuters analyzed 10 pre-IPO investments since the beginning of 2013 by the Johnson-led venture capital arm. The analysis found that, in six of those cases, Fidelity's mass-market mutual funds made major investments later and at much higher prices than the insiders' fund, resulting in lower returns for Fidelity fund shareholders. In the other four cases, Fidelity funds did not invest at all in companies in which the Johnson-led venture arm already had a sizable stake. Fidelity's internal guidelines prevent such investments when the Johnsons' venture holdings are "substantial," a standard that Fidelity declined to define to Reuters.
The Reuters examination also found:
• Over the past three years, U.S. regulatory filings show, the Johnson-led venture arm has beaten Fidelity mutual funds to some of the hottest prospects in tech and bioscience - including the best performing IPO of 2015.
• Fidelity mutual funds became one of the largest investors in six bioscience and tech companies backed by F-Prime Capital after the start-ups became publicly traded. Legal and academic experts said that major investments by Fidelity mutual funds - with their market-moving buying power - could be seen as propping up the values of the Johnsons' venture holdings.
• Key compliance executives have held dual roles overseeing investments by Fidelity and F-Prime Capital. For three years until September, the chief compliance officer for Fidelity mutual funds, Linda Wondrack, also served as chief compliance officer for Impresa Management LLC, the advisory firm that manages the investments of F-Prime Capital. Fidelity's James Curvey also wears two hats: He chairs a board of trustees that oversees many Fidelity stock mutual funds, and also serves as a trustee for one of the owners of Impresa. Curvey has been involved with the Johnsons' private investments for more than 20 years and has made millions of dollars from them.
• Some portfolio managers for Fidelity's mass-market funds receive lucrative partnership interests in the private F-Prime funds. Star portfolio manager Will Danoff, for instance, donated $4 million worth of Alibaba Group stock to Harvard University in 2015 that he received through the venture arm for $3,432, according to his family's charitable foundation.