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Lord Abbett Affiliated Manager Departs

A Fidelity fund manager steps down after inconsistent performance, Aberdeen closes on its acquisition of Artio, and a Goldman Sachs Asset Management fund manager retires.

Morningstar Fund Analysts, 06/13/2013

Lord Abbett announced on June 11 that Dan Frascarelli is being relieved of his duties as manager of the $6.8 billion Lord Abbett Affiliated LAFFX, effective immediately, though he will continue to manage separate accounts for the firm. Frascarelli and Randy Reynolds are also being taken off the smaller Lord Abbett Classic Stock LRLCX, which will be merged into Lord Abbett Calibrated Dividend Growth LAMAX pending shareholder approval. Affiliated is one of Lord Abbett's oldest and largest funds, but it has suffered from erratic performance over the past decade and has trailed three fourths of the large-value category since Frascarelli took over in 2009.

The new managers of both funds are Walter Prahl and Rick Ruvkun, who manage Calibrated Dividend Growth as well as Lord Abbett Calibrated Large Cap Value LCAAX and Lord Abbett Calibrated Mid Cap Value LVMAX. They will adopt the same hybrid strategy for Affiliated and Classic Stock that they've used for Calibrated Dividend Growth: fundamentally driven bottom-up stock-picking focused on dividend-paying stocks, but with a quantitative overlay designed to boost returns and keep performance consistent. The Calibrated funds are all less than two years old, so they haven't yet established much of a track record, but Lord Abbett is clearly betting the strategy will be successful.

Separately, Lord Abbett announced that Gerard Heffernan has been let go as manager of Lord Abbett Small Cap Value LRSCX, a little more than four years after he took over the fund from longtime manager Bob Fetch. The fund has a very strong track record under Fetch, and its 10-year returns still rank in the top decile of the small-blend category. However, returns have been mediocre since Heffernan took over in February 2009. Fetch is taking over the fund on an interim basis, using the same strategy he employed in the fund's glory days, and he plans to retire at some point after Lord Abbett finds a permanent manager. The fund has had a Morningstar Analyst Rating of Neutral, and that's not likely to change given the uncertainty about its future.

Fidelity Replaces PM on Fidelity Select Brokerage
Fidelity has replaced the manager of its $717 million brokerage and investment mutual fund and its $680 million financial services fund amid inconsistent returns.

Benjamin Hesse, who had been at the helm of Fidelity Select Brokerage & Investment Management FSLBX since 2007 and has led Fidelity Select Financial Services FIDSX since 2008, departed from the fund on June 7. His replacement, who signed on as the funds' manager on May 31, is longtime Fidelity portfolio manager Christopher T. Lee, who has been with the firm since 2004.

During Hesse's tenure, Fidelity Select Brokerage & Investment Management was down 0.6%, placing the fund in the category's top half. Fidelity Select Financial Services was up 3% annualized during his tenure but landed in the bottom one third. Both funds beat the MSCI US IMI/Financials 25-50 Index.

Fidelity management has prioritized consistent fund performance, and Hesse has not achieved that. For example, one-year rolling returns for Fidelity Select Financials landed in the category's bottom quartile nearly 36% of the time.

Artio to Aberdeen Transition Officially Closes
In late May 2013, Aberdeen Asset Management, a global firm based in the United Kingdom, formally completed its takeover of Artio Global Investors, parent of the Artio funds. As a result, the five remaining Artio funds are now advised by Aberdeen have taken Aberdeen names, and the three international-equity funds have new managers.

Morningstar fund analysts cover more than 1,700 mutual funds and write regular commentary covering fund industry news, fund investing trends, picks, portfolio planning, international investing, and more.
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