He's known as the ultimate "Fidelity Watcher" with the inside track. Eric M. Kobren, a former Fidelity Investments marketing manager, parlayed a brief stint at the Boston-based mutual fund giant in the 1980s into a publishing empire with a combined circulation of more than 100,000.
Before joining Fidelity, he received his MBA, worked as an analyst at Merrill Lynch & Co. and the former E.F. Hutton & Co., then at Delphi Management as vice president of research and trading.
Hulbert Financial Digest, which monitors the performance of investment advisory newsletters, rates Mr. Kobren's monthly report third in risk-adjusted performance after the No-Load Fund Investor and FXC Investor Corp. Not bad for a reluctant editor who admits he never took a writing class. But what's less known about the transplanted New Yorker is that as a registered investment adviser, he and his 52-member staff manage $1 billion in assets, including his own funds of funds, for clients with at least $400,000 to invest.
Q: How do you answer critics who suggest that because you need the entree into Fidelity, you are reluctant to criticize the firm.
A: These folks who suggest that I suck up to Fidelity are jealous. These so-called "Fidelity Watchers" don't have any insights into Fidelity. They don't have lunch with Ned Johnson, I do. Look, I have a lot more to lose if my trust is questioned. People forget that over the last two years, as Fidelity stumbled, I was the one who screamed at them and I could swear there were a couple of Uzis aimed at me from downtown. My relationship with them has been professional, but strained for many years and continues to be.
Q: In what ways is it strained?
A: I call the shots as I see them. They were angry when I announced that Fidelity planned to waive the load fees for (individual retirement accounts) several years ago. I told subscribers to hold off on contributing to their IRAs to save money. I continue to blast Fidelity's Asset Manager funds. This month, I sold Dividend Growth.
I sold Arieh Coll's Export Fund years ago. I advised shareholders to sell the Short Term Bond Fund back in 1994. At the time, $500 million left the fund in less than two weeks. It wasn't all due to me, but much of it was. On the other hand, I try to give Fidelity a heads up when I plan to move money. My job is not to wreak havoc at Fidelity, but to make money for my clients.
(A Fidelity spokeswoman responds: "We know Eric's newsletter is read by our shareholders, but we have no way of knowing how many are following his recommendations, so we can't speculate.")
Q: What's your take on the swarm of reporters that surrounds Fidelity?
A: I get annoyed with reporters who harp on changes in management. I won't comment on gossip. Fidelity has become a media event. I'd love to see who had more mentions: Princess Di or Fidelity over the last year. It's probably a draw.
Q: What was behind the launch of your adviser business?
A: In 1987 I put a note in the newsletter that said: 'If you want us to manage your money, write us.' I got 2,400 responses and we took our first dollar in 1990. Now, we have 1,200 clients in 49 states and the typical client has $800,000 invested with us. This month we reached $1 billion in assets under management. We are the largest client of Fidelity's Investment Advisor Group.
Q: What are your favorite funds?
A: Some of the new funds are awfully exciting for us. Cohen & Steers Special Equity, an aggressive (real estate investment trust) is only 4 months old and is up 37.9% since its inception. With the market being as high as it is, we're looking for diversification against the equity market - if the S&P plummets 20%, this fund should not behave the same way. We also like Oakmark Select, a large-cap value fund. It's focused, it only has two dozen positions on a regular basis, so it's able to make some substantial bets and I like Harris Associates, which runs the fund. We've made a ton of money in it; the fund is up 44.3% year-to-date. I also like Third Avenue Small Cap Value.
(In his October Fidelity Insight, he recommended: Fidelity's Low-Priced Stock, Mid-Cap Stock, and Fidelity Fund, for "well-diversified portfolios" in need of large-cap exposure.)
Q: How do you decide to buy or sell a fund?
A: We look at how attractive a particular style is given today's economic environment. If industry outlooks change, I'll revisit a fund and consider a substitution. Also, we know that "style creep" happens. One day a fund manager is a growth manager, another day they are value and the next day they are market timers, holding 30% cash - that will force me to reconsider a fund or the position. If someone goes 25% cash, I may still like the fund, but I will modify the portfolio to hold less cash.
Crain News Service