Fidelity Appoints New Bond Manager

Fidelity Fifty Fund to Merge With Focused StockA financial instrument giving the holder a proportion of the ownership and earnings of a company..

A special meeting of shareholders is scheduled for May 12 to vote on the proposal to fold Fidelity Fifty into Fidelity Focused Stock. Fidelity’s Board of Trustees has already unanimously supported the move, which will combine two funds with very similar investment goals and the same benchmark into one larger fund.

If approved by shareholders, the merger is expected to take place in early June 2015.

The two funds are managed by Stephen DuFour, who took over Fifty in March 2011. The fund’s name very simply describes its strategy, which is to invest in around 50 growth stocksA stock whose issuing company is expected to grow at a significantly higher rate than the market..

DuFour has managed Focused Stock since March 2007. The fund’s “focused” mandate has resulted in a portfolio concentrated in his best 30 to 80 ideas. DuFour has the ability to pick stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. from companies of any size, but has generally stuck to the large-cap growth sphere, and primarily opted for U.S. companies. He does not limit himself to any specific industry or sector when looking for names for the portfolio.

The Funds Are Now Nearly Identical

Source: Fidelity. Data as of 3/31/15.

Once taking over Fifty, DuFour reworked the portfolio to his liking, which made it a near mirror image of Focused Stock, giving Fidelity the chance to simplify its fund lineup by combining the portfolios.

One way we like to compare two funds here at Adviser Investments is to look at their relative performance head to head—when we chart those results, it shows up as a single line. When the line is rising, one fund is outperforming the other; when it’s sinking, the comparison fund is outperforming; and when it’s flat, the two funds are performing about the same. As the relative performance chart below shows, the funds have performed almost identically over the last four years.

Sources: Morningstar (data through 3/31/2015). Adviser Investments (analysis).

Beyond giving Fidelity a slimmer fund lineup, the merger also gives the firm a chance to remove Fifty’s performance track record, which isn’t as good as Focused Stock’s, from the books.

Fifty’s shareholders will receive an equivalent value of Focused Stock shares on the day the reorganization takes place. We don’t think the merger is a cause for concern for investors who own either fund, as the combined asset level will still be relatively small for a large-cap growth fund and the strategy should also remain the same under DuFour’s continued management. In addition, investors in Fifty will see their expenses go down from 0.83% to 0.78% with the move.

New Fidelity Fixed Income Index Manager 

Effective May 1, Jay Small will assume co-management of all Fidelity passively managed bondA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. portfolios. He takes over for Alan Bembenek. Small will join current co-manager Brandon Bettencourt.

Small will help oversee Spartan U.S. BondA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. Index, Series Inflation-Protected Bond Index, Inflation-Protected Bond Index, Spartan Inflation-Protected Bond Index, Spartan Short-Term Treasury Bond Index, Spartan Intermediate Treasury Bond Index and Spartan Long-Term Treasury Bond Index.

He has been at Fidelity since 2010. Before that, he worked as a corporate bond trader at 40/86 Advisors (formerly known as Conseco Capital Management). The move seems fairly routine and should not be a concern for shareholders in the funds impacted.

About Adviser Investments

Adviser Investments is a full service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994, and have more than 3,500 clients across the country and over $6 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, with particular expertise in Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To.

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