Fidelity Investments is no longer the largest money manager in its hometown report its local papers. Both the Boston Globe and Boston Herald reported Wednesday morning that State Street Corp., the parent to State Street Global Advisors (SSgA), now manages more assets than Fidelity.

State Street Global Advisors now manages some $1,106 billion of assets compared to $988 billion at Fidelity. SSgA passed Fidelity growing its asset base 44 percent in 2003, a pace that easily surpassed Fidelity's 28 percent growth rate last year. The comparison does not include assets a Fidelity affiliate manages in Europe.

David Spina, State Street's CEO, call the $1 trillion mark "A good milestone."

Yet neither report plays up what may be the more important story for executives at the two firms. Fidelity is likely the more profitable company. SSgA has built much of its business around providing low cost index funds for institutional investors and exchange-traded funds. Meanwhile, Fidelity has a larger retail and actively managed asset base that is likely throwing off revenues with higher built in margins.

Still, State Street executives said the firm earned $447 million on revenue of $1.5 billion in the fourth quarter before adjustments for one-time events. With the adjustments the earnings came in at $239 million. In 2002 State Street earned $477 million before adjustments for the fourth quarter on the same $1.5 billion in revenue and $174 million after adjustments.

State Street executives were also not as optimistic in their outlook as one may have expected based on the quickly rising stock market of the past half-year. Indeed, the price of the firm's shares dipped nearly 3.5 percent as senior executives used a conference call with analysts to warn of a possible tough 2004 as the firm faces stepped up competition and rising costs.

Spina also expressed concerns that the multiple investigations into mutual fund ethics are raising concerns among fund investors.

"All of the markets in which we compete are both hypersensitive and hypercompetitive," said Spina during the earnings call. "We need to be cautiously realistic."  

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