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Commentary

Cracks in the Wall at Fidelity

The game of managerial musical chairs continues.

One of the great stories of the mutual-fund world has been the revival of Fidelity. About four years ago, trouble abounded at the king of the industry. There were the Jeff Vinik crises--both his ill-timed move into bonds with Magellan (FMAGX) and the accusations (never proven) that he was talking up a stock he was selling. Then the firm was hit by a spate of manager departures, each one sparking a confusing game of musical chairs as Fidelity shifted other managers to fill the gaps. And some of the firm's funds--notably Fidelity Emerging Markets (FEMKX)--posted devastating losses. The giant was adrift.

Then Bob Pozen took control and righted the ship. He installed a firmwide discipline to lessen the chance of fund blowups, put Bob Stansky in charge of Magellan, and stemmed manager defections. When a manager did leave, Fidelity did not automatically change the managers on four or five other funds. Performance revived, and with it, public confidence in the family.