The wounds from Magellan's underperformance and its portfolio manager's recent departure continue to fester for Fidelity Investments, Boston.
In May, Putnam Investments bested behemoth Fidelity as well as Vanguard in net sales of long-term mutual funds. June was worse.
For the first time since Financial Research Corp. began tracking market share data in 1993, Fidelity dropped from the Chicago research firm's list of the top 10 selling fund complexes. After averaging net sales of long-term mutual funds of well over $2 billion since November, Fidelity saw $200 million in net redemptions in June, because of a cash drain from Magellan and several sector funds.
(Financial Research counts the Fidelity Advisor funds separately from the firm's other funds because the fund family is sold through broker-dealers.)
The industry saw a slowdown to a 12-month low of $8.8 billion in net domestic equity fund inflows in June, the report said.
The firm's May report noted Fidelity was hurt by negative publicity surrounding Magellan, whose portfolio manager, Jeffrey Vinik, stepped down recently. The Vanguard Group of Companies, Valley Forge, Pa., the leader in traditional stock index funds, was hurt by the outperformance of small-cap stocks over large caps earlier this year. Both factors - along with Putnam's strong performance in many small-cap funds - enabled Putnam to lead the industry.
In June, Boston-based Putnam remained on top with $2.118 billion in net sales and $11.989 billion year to date, followed by Vanguard with $2.101 billion in June and $16.176 billion year to date. Putnam's New Opportunities; Voyager and Growth & Income funds accounted for a large part of the firm's total inflows.
Asked whether the slip in May net sales stemmed from an overreliance on Magellan, J. Gary Burkhead, president and chief executive officer of Fidelity Management & Research Co., said: "In many, many instances, 401(k) sponsors use several Fidelity funds."
A Putnam spokeswoman said the sales increase stemmed from "very good performance," and a broad array of asset class choices.