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Fidelity Sacks Growth Manager, Shuffles Ranks

Vanguard Cuts Fees and More. 

Rob Wherry, 04/26/2012

Steven Calhoun has been dropped as a manager of Fidelity Growth Strategies FDEGX after an almost seven-year run of lackluster performance. Under Calhoun, the fund returned an annualized 3.1% through April 24, 2012, versus 6.3% for the Russell Mid Cap Growth Index, and its rolling 36-month returns failed to beat the mid-cap growth peer group 98% of the time.

Chris Lee, who joined Fidelity in 2004 and has managed Fidelity Select Consumer Finance FSVLX since 2009, will replace Calhoun as lead manager. Lee's promotion fits with a larger trend at Fidelity of narrowly focused sector managers jumping to more-diversified offerings. For example, the managers behind Fidelity Select Banking FSRBX and Fidelity Select Construction & Housing FSHOX were given the nod at Fidelity Trend FTRNX and Fidelity Overseas FOSFX, respectively. Calhoun's two other charges, Fidelity Advisor Growth Strategies FGVAX and Fidelity Mid Cap Growth FSMGX, will now be run by Fidelity's eight-member stock selector mid-cap team.

Fidelity also announced Fidelity Europe FIEUX will be managed from the firm's burgeoning London office. Fidelity is replacing the fund's Boston-based manager, Melissa Reilly, with London-based manager, Riesteard Hogan. Hogan does not have a public record managing money. However, he has run a European fund internally for Fidelity and has worked as an analyst at the firm since 2005. Reilly will remain the manager of Fidelity Europe Capital Appreciation FECAX.

In addition, Fidelity is slated to launch the Fidelity Global Equity Income Fund in May. The fund will be run by Ramona Persaud, who recently took over a small slice of Fidelity Equity-Income FEQIX, focusing on international stocks. The fund launch follows a broader effort by Fidelity to create more options for income-oriented investors, including naming new managers at Fidelity's existing two equity-income funds in October 2011. Industrywide dividend-focused strategies have been regaining popularity in today's low-yield environment. Barring additional new entrants, this will be the 22nd dividend-focused mutual fund to launch in the past 12 months.

Vanguard Cuts Fees
Vanguard announced expense ratio cuts on nearly 40 funds and ETFs this week, including some of its largest and fastest-selling funds.

The cuts average about 2 basis points, or hundredths of a percent, which doesn't seem like much until you consider the Vanguard's already low fee levels. Vanguard Inflation-Protected Securities Investor shares VIPSX, for example, cut its fees by 9%, to 0.20% from 0.22%. The Admiral share class of the fund dropped expenses to 0.10% from 0.11%. Inflation Protected Securities was Vanguard's seventh-best-selling fund for the year ending in March. It took in $3.9 billion in inflows, or nearly 12% of its asset level of a year ago.

Vanguard's largest index funds, including the Admiral share classes of Vanguard Total Stock Market Index VTSAX, Total Bond Market Index VBTLX, and 500 Index VFINX, also saw fee reductions. Notably, the fees of the Admiral share class of Vanguard 500 VFIAX and the Vanguard S&P 500 ETF VOO are now 0.05%, making them the cheapest S&P 500 index funds retail investors can buy.

Vanguard has dominated fund flows recently. In the year ending March 31 it gathered more than $68 billion in inflows, according to Morningstar estimates. At the start of the year it reported that it had nearly $1.8 trillion under management. That allows the family to pass economies of scale on to investors in the form of lower fees.

Rob Wherry is a mutual fund analyst with Morningstar.
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