![]() ![]() 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. Key compliance executives have held dual roles overseeing investments by Fidelity and F-Prime Capital. It is possible that the examination missed other relevant examples among F-Prime Capital’s many investments. During this time, Fidelity mutual funds began ramping up their strategy of investing in pre-IPO start-up companies. The examination covered a three-year period, from 2013 to the present. Reuters identified 10 investments in which F-Prime Capital Partners, controlled by the Johnsons, was competing on the same turf as Fidelity mutual funds. Reuters combed through public securities filings to explore overlap between the investing activities of Fidelity Investments, which serves some 20 million clients, and proprietary investment vehicles of the family that controls Fidelity, the Johnsons. METHODOLOGY: How Reuters analyzed the Johnsons’ trading 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. ![]() 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. ![]() 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‘s internal guidelines prevent such investments when the Johnsons’ venture holdings are “substantial,” a standard that Fidelity declined to define to Reuters. 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. 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. Reuters analyzed 10 pre-IPO investments since the beginning of 2013 by the Johnson-led venture capital arm. ![]() SEC spokeswoman Judith Burns said the agency could not comment on a specific company. securities laws, which prohibit affiliated entities from buying substantial stakes in the same companies at the same time. If both the private fund and Fidelity‘s ordinary funds had invested, they would have violated U.S. The pre-IPO investment effectively prevented Fidelity mutual funds from making the same play. In 20, the Johnsons’ F-Prime Capital invested a total of $11 million on Ultragenyx (RARE) before the start-up made an initial public offering of its stock. That conflict can be seen in the case of Ultragenyx Pharmaceutical Inc, a promising biotech start-up. It’s an arrangement that securities lawyers say poses an unusual conflict of interest. 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. In at least one lucrative field, however, the Johnson family’s interests come first. 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. ![]()
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