BOSTON – Fidelity Investments recorded an operating profit of $2.36 billion in 2008, an 18 percent decline from the $2.89 billion it posted for all of 2007, on annual revenue that fell 4 percent to $12.94 billion, the firm said in its annual report.

“Until the end of August, before the economic storm arrived, Fidelity’s results were on schedule,” Chairman and CEO Edward C. “Ned” Johnson III wrote in a letter to shareholders that accompanied the annual report. But in September, “we entered a downdraft in stock prices which hasn’t been seen since the ’30s.”

Assets under Fidelity management fell 22 percent to $1.25 trillion at Dec. 31, from $1.4 trillion on Sept. 30 and nearly $1.6 trillion at the end of 2007, as the global financial markets tumbled and investors withdrew $53.7 billion from Fidelity stock funds. Total administered assets – including Fidelity-managed funds as well as money for which the firm performs record-keeping and other administrative functions – fell 23 percent year over year to $2.6 trillion.

Fidelity’s 400-some investment funds outperformed 56 percent of their competitors last year, down from 73 percent in 2007.

The company’s fixed-income funds declined by an average of 4.6 percent in the past year, beating 62 percent of rival funds in their respective categories, according to Morningstar Inc. in Chicago.

But its stock funds – including the high-profile Magellan Fund and Contrafund, both of which were reopened to new investors last year – outperformed only 36 percent of their peers, down from 72 percent the year before, Morningstar data show. Contrafund outperformed 64 percent of rival funds, while Magellan outperformed only 5 percent. Magellan fund manager Harry Lange had acknowledged in November that he had misjudged both the depth of the housing slump and its effect on the financial markets. (READ MORE) And Fidelity acknowledged in its annual report that investments in “higher-risk profiles” had hurt its results after Lehman Brothers’ collapse last fall.

Still, although the overall performance of Fidelity’s stock funds last year “was not where it should be – and steps are being taken to bring improvement; among them is the creation of small groups of more closely focused analysts and managers” – the company still is “in far better shape than most in our industry,” Johnson noted.

Fidelity’s annual payout to its shareholders rose by $85.99 last year, but that increase was 18 percent smaller than in 2007, Bloomberg News reported. The company said it does not reveal details of the payout.

Fidelity was founded in 1946 by Johnson’s father, 11 years before the now-chairman joined the company as a research analyst. Members of the Johnson family still hold 49 percent of Fidelity voting stock, while key employees hold the other 51 percent.

“Basically, they treaded water pretty well,” Jim Lowell, a former Fidelity employee who runs the independent newsletter Fidelity Investor, told the Associated Press.

In other news, Anthony W. Ryan, a former assistant secretary of the U.S. Treasury Department, joined Fidelity this week as its new head of Asset Management Strategy and Product Development.

His arrival follows the retirement earlier this month of Dwight Churchill, who had led the company’s bond investment division since 2000. (READ MORE) Charles Morrison, who oversees Fidelity’s money-market funds, is overseeing the bond division on an interim basis.

The company – which as of Nov. 6 listed 44,400 employees, including nearly 3,000 in Smithfield and Providence – had about 43,110 at year’s end after eliminating 1,290 jobs in November. Those staff cuts, and the additional work force reductions the company has pursued this year, were to be “proportionately” across its staff, Fidelity said last fall. (READ MORE)

Fidelity Investments is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans and a leading online brokerage firm. FMR Corp. is the holding company for operating businesses Fidelity Employer Services Co., Fidelity Investments Distribution and Operations Co. and Fidelity Technology Group. Additional information is available at www.fidelity.com.