8
Morningstar analysts recently visited Fidelity’s Boston
headquarters and Baltimore-based T. Rowe Price.
Below, we look at a few themes that jump out and
how the two shops compare.
Seeking Stability
Frequent manager turnover has long been a criticism
of Fidelity’s equity funds. (There’s been more consis-
tency on the fixed-income side.) Analysts often shuf-
fled between sector and industry funds to get their
feet wet. In fact, Fidelity used to deliberately move an
analyst to a sector fund where he didn’t have experi-
ence for the sake of grooming better-diversified
managers down the line.
Fidelity has taken small steps to improve. In the mid-
2000
s it began hiring experienced sector managers
who wouldn’t want to bolt for diversified funds, length-
ening the tenure on some of its major sector funds.
(The industry-focused funds still see a lot of churn.)
Recently, Fidelity added comanagers to improve suc-
cession planning and help handle capacity at its
biggest funds. Will Danoff, who runs more than $
100
billion between
Fidelity Contrafund
FCNTX
and
Fidelity New Insights
FNIAX
, chose John Roth as
his comanager at New Insights. Gopal Reddy assists
Steve Wymer at
Fidelity Advisor Growth Oppor-
tunities
FAGAX
. (Wymer also runs the much bigger
Fidelity Growth Company
FDGRX
.) Joel Tillinghast
selected a team to run
Fidelity Low-Priced Stock
FLPSX
when he took a short sabbatical. The team has
continued to run a small sleeve upon his return.
Derek Janssen was named comanager of
Fidelity
Small-Cap Value
FCPVX
following huge asset
growth at manager Chuck Myers’ two charges. (Both
funds are now closed to new investors.) While
these appointments add some clarity to the future
of Fidelity’s marquee funds, the firm still could
do more to smooth transitions across its sprawl-
ing lineup.
In contrast, T. Rowe has long been a model in the
industry for how manager transitions should play out.
Because managers often spend their careers at
the firm, departures are typically retirements that are
announced well in advance, allowing a months-long
transition period for the incoming manager. Longtime
T. Rowe Price Small-Cap Value
PRSVX
manager
Preston Athey, for example, announced his June
2014
retirement in August
2012
. Some T. Rowe funds,
including Gold-rated
T. Rowe Price Mid-Cap Value
TRMCX
, have long had associate portfolio managers
who work closely with the manager. Others, such as
Gold-rated
T. Rowe Price Capital Appreciation
PRWCX
, have moved in that direction as assets have
grown. The associate portfolio manager role, while
not used at all funds, offers backup and provides a
logical successor.
T. Rowe is not immune to unexpected departures. Kris
Jenner of formerly Gold-rated
T. Rowe Price Health
Sciences
PRHSX
left to start his own hedge fund in
February
2013
, taking two analysts with him. Taymour
Tamaddon, a nine-year member of the health-care
team, replaced him. T. Rowe has since filled the open
slots on the health-care team, but with analysts still
getting up to speed, the team is not as solid as before.
Joe Milano, of formerly Gold-rated
T. Rowe Price
New America Growth
PRWAX
, also abruptly left
in May
2013
to start up his own hedge fund after a
successful run of nearly
11
years at the fund. Dan Mar-
tino, who posted strong results during nearly four
years at
T. Rowe Price Media & Telecommunica-
tions
PRMTX
, took over, though this is his first diver-
sified charge.
Despite those uncharacteristically abrupt changes
at T. Rowe, the firm has tried to offer consistency
where it can. Martino remained on board at Media
&
Telecom until September, helping smooth the path
for his successor, Paul Greene, who was taking on his
Refreshing Our View of 2 Fund Giants
Morningstar Research
|
Katie Reichart
