Fidelity Promotes Muni Bond Head to CIO

Fidelity announced Monday that Christine Thompson, who has led the firm's municipal bond fund management efforts since 2002, will assume the role of chief investment officer of Fidelity's Bond Group. The role was newly created by Christopher Sullivan, who took over leadership of Fidelity's bond efforts in 2009.

Fidelity's municipal bond fund lineup has performed exceptionally well under Thompson's direction. Over the past five years, 15 out of the 16 Fidelity muni funds that have been around that long have beaten at least 75% of their peers. Those numbers look even more impressive over the past decade: Roughly half have landed in their respective category's best-performing decile during that time, and all but one made it into the best-performing quartile. Most also accomplished those results while suffering less volatility than the category norm.

Thompson, like her predecessors, was never content to let the fund's low expense ratios do all the work. Seamless communication and collaboration among all the different functions on the team--trading, credit research, quantitative research, and portfolio management--helped keep the funds one step ahead of the competition in a variety of different market environments, and especially when investors needed it most in 2008's downturn. We recognized Thompson for the team's outstanding work by nominating her for Morningstar's Fixed-Income Manager of the Decade Award in 2009.

After many of Fidelity's taxable bond funds were stung by exposure to subprime-backed bonds through an internal ultrashort portfolio, it became clear that the taxable team could take some cues from their muni colleagues. The firm has taken a number of important steps to get the taxable lineup back on track, but the addition of Thompson's investment-focused oversight is the most encouraging sign we've seen yet.

Unlike T. Rowe Price's former fixed-income chief Mary Miller, who kept managing munis after her promotion, Thompson will hand off her portfolio management duties on all her funds, including  Fidelity Municipal Income (FHIGX) and  Fidelity Massachusetts Municipal Income (FDMMX). Fidelity muni fund shareholders remain in highly capable hands, though. Her comanager on  Fidelity Tax-Free Bond  (FTABX), Jamie Pagliocco, will direct the team's portfolio management efforts. He and Mark Sommer, who runs  Fidelity Intermediate Municipal Income (FLTMX) and others, will each take the lead role on the firm's national funds. They'll be joined by Kevin Ramundo, a senior credit analyst with Fidelity for the past 10 years, who will also take over Thompson's single-state muni offerings. All three will now serve as comanagers on the national portfolios, although this doesn't mark much of a change from the team-oriented culture under Thompson. (Portfolio management changes are effective June 30.)

We've always liked that the Fidelity muni team's managers brought together complementary skills: Pagliocco came from trading, and Sommer from quantitative research, and Thompson brought her credit research background to the mix. Ramundo's appointment keeps that structure in place. As an analyst, he has focused on the health-care sector, an area of strategic importance across Fidelity's muni fund lineup in recent years.