BOSTON: Fidelity Investments will cut nearly 1,300 jobs, or 2.9% of its staff, this month and plans more layoffs in the first three months of next year, the world's biggest mutual fund company said on Thursday.

Fidelity's biggest job cuts in six years follow a slump in assets as investors pull record amounts of money from mutual funds during the financial crisis. Details of the second round of job cuts will be finalized in coming weeks, Fidelity said.

"While our company overall is doing well and is strong and stable, the extraordinary world events of the last couple of months have certainly had an impact on our revenues," Fidelity spokeswoman Anne Crowley said.

She said total layoffs would be fewer than the 4,000 job cuts that industry newsletter Ignites indicated Fidelity was considering.

Privately held Fidelity, which employs 44,400 people globally, already cut about 1,000 jobs in three rounds of layoffs in the past year, but there have been no cuts in its main money management business.

Crowley said no fund managers or analysts will be affected by the new layoffs. Fidelity employs 261 portfolio managers and 552 research professionals globally.

"Fidelity wouldn't do this unless things are tough," said Henry Higdon, a managing partner of Higdon Partners, an executive search firm in New York that serves financial clients including Fidelity.

"If they thought things were going to get better, that we had hit the bottom already, they may not have done this. I think what that tells you is that most of these organizations expect things to get worse," he said.

As markets boomed over the past five years, Fidelity added 15,000 employees. That followed cuts of 1,700 jobs, or 5.4% of its workforce, in the last bear market of 2002 in the wake of the bursting of the technology bubble.

It also slashed 10% of workforce in the late 1980s, Crowley said.

Crowley declined to say whose jobs would go in the latest layoffs but said most business units were gearing up for cuts.

The announcement followed an e-email sent to staff earlier on Thursday by Fidelity President Rodger Lawson that said layoffs would come this month and in the first quarter of next year, according to a source close to Fidelity.

MONEY-MARKET INFLOWS

Fidelity and other fund companies, including Legg Mason Inc and Janus Capital Group Inc, are scrambling to cut costs during market turmoil brought on by losses in subprime mortgages that have snowballed into the worst financial crisis since the 1930s.

The industry generates the bulk of its revenue from fees based on a%age of assets under management, which have dropped sharply.

Fidelity's assets under management fell about $100 billion in September and stood at $1.4 trillion at the end of that month. Fidelity has not disclosed October asset numbers.

Crowley said Fidelity funds saw net sales of more than $30 billion in the first 10 months of 2008.

"And that's largely due to very strong net sales into our money-market funds, which offset any net outflows from equities," she said.

Loren Fox, senior research analyst at Strategic Insight, a mutual fund consulting and research firm, said the 2.9% November reduction meant Fidelity was using a "scalpel rather than a hatchet."

"Being privately held, there's far less pressure on Fidelity to meet quarterly numbers," Fox said.