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Fairholme Launches Third Mutual Fund

Fairholme Allocation bears a resemblance to its topnotch sibling

Morningstar Analysts, 11/01/2010

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Morningstar Domestic-Stock Fund Manager of the Decade Bruce Berkowitz's Fairholme Capital plans to launch an asset-allocation fund, according to regulatory filings made this week.

The proposed Fairholme Allocation will be the firm's third mutual fund and second that it has launched this year. In January, it rolled out the Fairholme Focused Income FOCIX bond fund.

At first glance, the new offering doesn't sound that different from the firm's $16.7 billion flagship Fairholme FAIRX fund. Like its sibling, the new fund can invest in a focused portfolio of stocks, bonds, and cash based on management's assessment of fundamental values. There are no restrictions on the fund's allocations to these asset classes, nor are there limitations based on market cap, sector, region, maturity, or credit quality. However, Fairholme Allocation is better positioned to invest in smaller securities that would no longer move the needle at the massive Fairholme fund.

The new fund's expense ratio of 0.75% includes a 25-basis-point waiver that will last through at least the end of 2011. Fairholme fund charges 1.00% and Fairholme Focused Income charges 0.50%. Like Focused Income, Allocation has a $25,000 investment minimum. Fairholme requires $10,000.PAGEBREAK

Fidelity Expands Manager's Duties
Fidelity Investments will replace manager Charles Hebard at the underperforming  Fidelity Blue Chip Value FBCVX with Michael Chren on Nov. 1. Chren has run another large-value Fidelity offering, Fidelity Series Large Cap Value FLVSX, since February 2009. In that short time, the fund has lagged both the category and the Russell 1000 Value Index. Prior to joining Fidelity in 2009, his experience included portfolio management duties at Allegiant Asset Management and Invesco.

Hebard has run Blue Chip Value for a little more than three years, and in that time it has lost 11.7% annually, placing it in the bottom decile of large-value funds. Stock selection has hurt this fund's benchmark-centric approach, and it has also trailed the Russell 1000 Value Index by more than 3 percentage points over that period.

Saumen Chattopadhyay, who had served on the investment committee overseeing Harbor Funds' target retirement fund series and had day-to-day responsibility for the series, has left the firm. Committee member Paul C. Herbert will take over the day-to-day role.

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