Fidelity Shifts Workload of Key Manager
Mutual fund giant Fidelity Investments said Wednesday that it is paring the workload of star fund manager George Vanderheiden to let him focus on his strength: picking stocks.
Vanderheiden will continue to run the $23-billion Advisor Growth Opportunities Fund, which Fidelity watchers said is strategically important as the keystone of the group of funds Fidelity sells through brokers and banks.
However, four of the other six funds Vanderheiden manages will be switched to different managers this spring, Robert C. Pozen, president and CEO of Fidelity’s fund group, said in a conference call with reporters.
The 52-year-old Vanderheiden said that as his funds exploded to $43 billion in assets from $17 billion in just two years, he found himself deluged with “non-investment” duties, and the funds’ performance slipped.
Advisor Growth Opportunities, though top-ranked in its class by research firm Morningstar Inc., lagged the Standard & Poor’s 500-stock index in 1996 and ‘97, posting total returns of 17.7% and 28.6%, respectively, compared with 23.0% and 33.4% for the S&P; 500.
Concerned that corporate earnings would slow, Vanderheiden began buying bonds in 1995, building them up to 12% of the fund’s holdings. But stocks continued to outperform bonds until the last quarter of 1997, he noted.
Net sales of Advisor Growth Opportunities declined to $2.1 billion last year from $6.2 billion in 1996, according to David O’Leary, president of Alpha Equity Research and a persistent Fidelity critic. Fidelity would not confirm the sales figures.
O’Leary said Fidelity is anxious to shore up the performance of the Advisor funds because the brokers who handle them are quicker to sell them at the first hint of trouble than are individual investors, who buy Fidelity’s other funds directly or through their employers’ retirement plans.
Pozen said the changes are “not some type of punishment for George’s bad performance. . . . There is no performance problem.”
Minneapolis money manager Robert Markman said Fidelity’s action reflects a problem that pervades the industry: “The available brains have not expanded at the same rate as the assets.”
Werner Keller, whose FundMinder firm in Sherman Oaks manages mutual fund portfolios, remains a fan of both Vanderheiden and Advisor Growth Opportunities. “We didn’t think it was broken, but if things get better, great,” he said.
Fidelity said that in addition to Advisor Growth Opportunities, Vanderheiden will continue to manage Variable Insurance Products Fund III: Growth Opportunities Portfolio and the Destiny I fund.
In other moves, Fidelity said Beth F. Terrana will succeed Vanderheiden as manager of the Destiny II fund on June 1; Thomas M. Sprague will take over as sub-portfolio manager for the equity portion of Fidelity Asset Manager on April 1; and Bradford F. Lewis will become sub-portfolio manager for the equity portions of Fidelity Asset Manager: Growth and Fidelity Asset Manager: Income, also effective April 1.
