New Fidelity fund chief stands by star system

Wed Jan 20, 2010 6:38pm EST

* Jacques Perold says fund bets paid off in 2009

* Perold: sometimes the best change is no change

By Ross Kerber and Aaron Pressman

BOSTON, Jan 20 (Reuters) - Fidelity's new asset-management chief styles himself a team player in a star system.

"I've been the encouraging soul on the side," said Jacques Perold on Wednesday, explaining his position with managers in one of his first interviews since being named in December to run the company's more than $1 trillion asset-management business.

Such warm-and-fuzzy comments are hardly the norm at hard-charging Fidelity, known for famous contrarian managers like Peter Lynch.

Many of Fidelity's funds have posted mediocre returns in the past decade as they grew large and unwieldy, but 2009 marked a solid turnaround, the company said in a presentation released on Wednesday.

Some 74 percent of all Fidelity funds outperformed their peers, up from 56 percent in 2008. Among its well-known equity mutual funds, 66 percent beat their peers in 2009, up from just 36 percent in 2008.

In an interview at the company's headquarters in Boston, Perold said investors should give Fidelity more credit.

"These results speak to the value of active management," he said, defending his teams of stock-pickers against those who maintain that lower-cost index funds deliver better performance over time.

Perold acknowledged the bad times in 2008, which he blamed on managers' failure to foresee the depths of the worst financial crisis in decades.

"As 2008 was starting to happen it wasn't clear where it was going to end. Cheap stocks got cheaper. It was a value trap," he said.

But the company stood by nearly all its hundreds of fund managers, replacing fewer than 20 and standing by brand-names despite their stumbles.

He cited the example of Magellan manager Harry Lange, who kept his post even after the fund, once the world's largest, dropped 49 percent in 2008. Magellan, like many funds, turned around in 2009, rising 41 percent.

"Sometimes the best change you can make is no change," Perold said. "The best thing to do was to keep them on the beat."

Perold said Fidelity was using more "team-management" strategies to arrive at investment ideas for some funds, as well as investing more in foreign markets.

But he doesn't foresee changes to its main strategies. "We'll always embrace the star system," he said.

Perold's comments were part of a three-part presentation that Fidelity executives gave to journalists on Wednesday, highlighted by news that President Rodger Lawson planned to retire in March. [nN20177972]

Lawson leaves after a tumultuous period overseeing Fidelity, but cited performance figures he said backed his decisions to slash jobs, control costs, and allow Fidelity to outpace asset-management rivals.

The performance of Perold's division was part of that picture, Lawson and top financial executive Robert Chersi said. In all, Fidelity's assets under administration stood at $3.2 trillion at the end of 2009, up from $2.6 trillion at the end of 2008.

These included flows into Fidelity's mutual funds of $94 billion through September of 2009, which Fidelity said outpaced all large rivals. For all of 2009 it said it had inflows of $123 billion.

(Reporting by Ross Kerber and Aaron Pressman; Editing Bernard Orr)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.