Fidelity may rein in star stock pickers

Firm considering move to team management approach, says Wall Street Journal.
FEB 26, 2018

In a sign of the growing emphasis by companies to eliminate workplace harassment, Fidelity Investments said it is considering reorganizing its mutual fund management operations in a way that would deemphasize stock-picking star managers and emphasize teams. According to a report by the Wall Street Journal, the changes Fidelity is considering stem from a consultant's review conducted late last year that was prompted by claims of sexual harassment and other undesirable workplace behaviors in the stock-picking unit. The change also follows the pressure passive management is exerting on even the largest active managers, which have seen outflows from previously high-flying funds led by highly paid star analysts. With the luster of their former top performers dimmed, fund companies have less economic incentive to overlook questionable behavior. The Journal reported that Fidelity is considering a team-based approach that gives analysts and senior managers more-comparable footing in choosing securities. (More: Is Fidelity competing with retirement plan advisers?) While the firm already has formed "advisory teams" of senior executives and staff members from its asset-management business, those moves "are not an indication that any decisions have been or will be made" about making such changes permanent, Fidelity spokesman Vincent Loporchio told the Journal. Fidelity has seen redemptions continue in its active mutual funds despite relatively strong performance. Fidelity had $33.9 billion in outflows from active funds in the 12 months ending Jan. 31, according to data from Morningstar Inc. Over the same period, its funds that mimic indexes attracted almost $60 billion. Index funds charge much lower fees than active funds. In January alone, Fidelity had $1.5 billion in outflows in active funds, according to Morningstar. Passive funds had $9.8 billion of inflows that month. Bloomberg News contributed to this story.

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