Boston-based Fidelity Investments, one of the largest US fund managers, has lost a contract to run a $3bn cash fund on behalf of its home state, the Commonwealth of Massachusetts, which it had held for 35 years.

Massachusetts' state treasurer, Steven Grossman, announced the contract termination yesterday. The state has recruited Federated Investors, a rival fund manager based in Pittsburgh, to manage the money in Fidelity's stead.