Fidelity's International Lineup in Disarray

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When Fidelity officials announced sweeping changes in the size and structure of their analyst corps in the summer of 2005, their goal was to improve the performance of their domestic-stock fund lineup. By contrast, they thought their international-fund and fixed-income operations were in tiptop shape.

At the time, we didn't consider Fidelity's international lineup to be quite as outstanding as Fidelity did, but we did have a positive opinion overall and thought many of the firm's foreign-focused offerings deserved strong consideration from investors. Since then, however, a shocking number of manager changes throughout Fidelity's international lineup has sharply diminished its appeal.

Manager turnover is nothing new at Fidelity. But the amount of turnover in such a brief time period--and, in too many cases, the unsatisfying replacement situation--is disturbing. In fact, nine of Fidelity's retail international funds are now run by managers with tenures of less than 12 months. It's not an exaggeration to say that, in that respect, Fidelity's international lineup is in disarray.

Mace's Leave Leaves New Faces in Place

The depth of the problem becomes clear when we look at the individual changes. Among the broad-based funds, many of those changes involve Rick Mace's offerings. Mace had been manager of Fidelity Overseas FOSFX, Fidelity Worldwide FWWFX, Fidelity Aggressive International FIVFX, and Fidelity Global Balanced FGBLX. On Jan. 1, he began a leave of absence from Fidelity that's slated to last six months.

That wasn't necessarily bad news, as Mace's record at the three funds he had led for many years (he took over Aggressive International only recently) had not been impressive. Still, the resulting situation is far from satisfying. Fidelity stated that in Mace's absence an interim four-person team--all of whom already have substantial responsibilities running their own funds--will guide Aggressive International and Global Balanced. At Aggressive International, where Mace had replaced Kevin McCarey, Fidelity says Mace will be back in charge when he returns from leave. Same for Global Balanced. But if for some reason that doesn't happen and a new choice replaces the interim team at Aggressive International, that would mean the fund will have had four different managers in less than a year (counting the interim team as just one manager).

Mace is not slated to return to his other former charges, Overseas and Worldwide. Ian Hart was moved from Europe Capital Appreciation to head up Overseas, while the duties at Worldwide (where Brian Hogan, who picked the domestic stocks, is gone) are being split between two managers: William Kennedy, an international manager who also is running Fidelity International Discovery FIGRX, and Jeffrey Feingold, a domestic specialist who has run only sector funds.