BOSTON - Four mutual funds most popular with defined contribution plans got new portfolio managers amid changes announced last week by Fidelity Investments.
Fidelity Magellan, the single most popular equity fund among defined contribution plans, was unaffected. But on April 1, new portfolio managers will take over Fidelity Puritan, with $5.397 billion in defined contribution assets; Fidelity Asset Manager, $3.613 billion; Fidelity Overseas, $1.409 billion; and Fidelity Asset Manager Growth, with $1.102 billion. All defined contribution figures are as of Dec. 31.
At Puritan, Fidelity is putting a rising star in the place of a veteran portfolio manager who earned an above-average risk-adjusted rating from Morningstar Inc., the Chicago mutual fund researcher. In fact, the new manager, Bettina Doulton, is trading places with the former manager, Richard Fentin, who will assume her post running the Fidelity Value fund.
International portfolio managers also are playing musical chairs. Fidelity's core international fund, the $2.6 billion Fidelity Overseas fund - in which defined contribution plans account for more than half the assets - will be taken over by Richard Mace. The former manager, John R. Hickling, will return to Fidelity International Growth & Income, a fund he managed before Mr. Mace took it over in November 1993.
Like Puritan, Fidelity Overseas is losing a strong manager. Mr. Hickling, a 14-year Fidelity veteran, has turned around the fund's sub-par performance since he took over its management three years ago. The new manager, Mr. Mace, joined Fidelity in 1987.
In the case of the Asset Manager funds, Fidelity is adopting a team approach featuring a veteran stock picker, George Vanderheiden. It is reassigning Robert Beckwitt, a manager who, after spectacular gains in the early 1990s, was hurt by his risky bets in 1994.
In keeping with Fidelity's corporate culture, most of the newly named managers are home-grown, having trained at Fidelity as analysts.
Moves prove who's in charge
In a broad sense, the changes show that despite all of the media attention on portfolio managers, the real power at Fidelity is higher up.
"There's an awful lot of attention paid to who are the portfolio management people. People overlook who's in the corner office .*.*. At Fidelity, the overall top layer of the company sets the styles in which the managers operate," said Jon Teall, a spokesman for Lipper Analytical Services, Summit, N.J., a mutual fund data firm.
Puritan, a balanced fund, had $16.4 billion in assets as of Feb. 29. The new manager, Ms. Doulton, has managed the $6 billion Fidelity Value fund since last March and Fidelity Advisor Equity Income since 1990.
As manager of the Fidelity Advisor Equity Income Fund, Ms. Doulton distinguished herself with a three-year annualized return ended Dec. 31 of 18.6%, exceeding those of older Fidelity funds like Equity-Income and Equity-Income II. Her savvy sector shifts in 1994 helped her chalk up a 6.5% return for that year while other funds lost money. Ms. Doulton joined Fidelity in 1986 and became a portfolio manager in 1990. Previously, she served as an assistant portfolio manager and an equity analyst.
When Ms. Doulton took over the five-star rated Fidelity Value fund last March, she pared 100 names from its portfolio and brought its foreign stock allocation down to 10% from 25%. She also doubled the fund's position in financials, according to Morningstar.
Although Ms. Doulton is clearly shaking things up, Mr. Fentin's record was none too shabby. Under Mr. Fentin, Puritan scanned the globe for values in both stocks and bonds. Although the fund had a tough 1995, lagging 82% of its peers with a 21.46% return, the manager outpaced 95% of his rivals in 1994 because of Japanese equity holdings, according to Morningstar.
Mr. Fentin joined Fidelity in 1980.
William J. Hayes, director of equity investments at Fidelity, said Mr. Fentin "has done a superb job," but "his interests have grown and horizons have broadened. He's getting a portfolio with a broader investment objective and a broader list of securities.....He doesn't have to focus as much on yield."
Fidelity Overseas seems to be switching managers just as its performance is turning around. But Mr. Hayes said: "John (Hickling) did a good job on Overseas," but he did a stellar job on International Growth & Income, a fund he used to manage, bringing its assets up to more than $1 billion from less than $100 million in only 15 months.
"Three years ago we asked John to give up International Growth & Income for Overseas. Now we've asked him to go back to the scene of his earlier triumphs," said Mr. Hayes.
Eric Kobren, executive editor of Fidelity Insight, an independent newsletter in Wellesley Hills, Mass., said: "I don't deem the Overseas and Puritan changes to be significant. (Ms.) Doulton will be able to manage Puritan in much the same way (Mr.) Fentin did."
Not everyone agrees with all of that assessment.
"It remains to be seen what Mace is bringing to the table that Hickling didn't," said Jeff Kelley, senior editor of Morningstar Mutual Funds.
"We're really at a loss. Mace is not really a known player; now he's jumping from running one fund to running a whole group."
Team to direct Asset Manager
Fidelity Asset Manager, which had $11.1 billion as of Feb. 29, and the $2.987 billion Asset Manager Growth, which derived almost half of its assets from defined contribution plans as of Dec. 31, now will be managed by a team of four headed by Richard Habermann, who will do the asset allocation.
Equities will be run by Fidelity veteran Mr. Vanderheiden, who joined the firm in 1971. Michael Gray and Kevin Grant will run fixed-income and short-term/cash portfolios. Messrs. Grant and Gray also will assist Ms. Doulton in managing Puritan.
"Asset Manager's performance has not been as strong as we'd like. We're consolidating all retail and institutional funds under one manager with a subportfolio structure," said Mr. Hayes.
Although Asset Manager, a multiasset fund, has gotten some negative press lately for losing 7% in 1994 and logging only average gains in 1995, it remains a four-star fund at Morningstar. And the company was quite positive in its report on the soon-to-be former fund manager, Robert Beckwitt, who has been reassigned to Fidelity's Portfolio Advisory Services, which provide asset allocation services to high net-worth individuals.
"While its volatile past couple of years are hard to ignore, this fund still is a solid choice. Its long-term record is good and, despite its brushes with trouble, its risk scores are still moderate," said Morningstar's Jan. 19 write-up.
Mr. Vanderheiden, the new equity manager of Asset Manager and Asset Manager Growth, will continue to run the five-star-rated Fidelity Destiny I and II as well. Mr. Vanderheiden's Destiny I was hailed by Morningstar as "one of the best stock portfolios available."
Newsletter editor Mr. Kobren thinks the Asset Manager funds will become more conservative and domestic-oriented, compared to before, when "(Mr.) Beckwitt ran those funds as mini hedge funds."
In addition, Mr. Beckwitt embraced quantitative approaches while the new management team reflects "a return to traditional Fidelity stock-picking methods," said Lipper's Mr. Teall.
Fidelity announced March 11 it was making management changes to 26 equity funds - almost one-third of its stock funds.