Home Adviser Fund Update Fidelity Launches Event-Driven Funds Published January 3, 2014 Fidelity Flips Calendar, Managers As the calendar turns to 2014, Fidelity has continued its annual tradition of shuffling assignments for managers on several funds. The changes appear to be routine and unlikely to have a major impact on shareholders. The manager changes effective January 1 include: Fidelity DividendA cash payment to investors who own stock in the company. Growth. Ramona Persaud has succeeded Larry Rakers as portfolio manager. Combined, Fidelity Dividend Growth and Fidelity Advisor Dividend Growth will give Persaud nearly $10 billion in assets under management. Over the past three years, Fidelity Dividend Growth returned an annualized 12%, underperforming 91% of its peer funds. Advisor Dividend Growth has lagged 74% of similar funds over that period.Persaud will also remain a manager for Fidelity’s Global EquityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. Income fund, its Advisor clone and the global sub-portfolio of Fidelity Equity-Income. Persaud has been at Fidelity since 2003 and assumed her prior portfolio manager positions in 2011.Rakers is taking on a new position with Fidelity’s Global Asset Allocation. Fidelity VIP Balanced Portfolio. Also succeeding Rakers, the StockA financial instrument giving the holder a proportion of the ownership and earnings of a company. Selector Large Cap Team, led by Bob Stansky, has added another fund to its charges. The team will continue managing Fidelity Balanced, Fidelity Advisor Balanced, and Fidelity Series All-Sector Equity (all managed since 2008) and VIP Contrafund (2007). Fidelity Disciplined Equity. Alex Devereaux has taken sole portfolio management responsibilities. He had co-managed the fund alongside Keith Quinton since January 2013. Devereaux joined Fidelity in 2005 as a quantitative analyst in the core Quantitative Research group, where he focused on alpha modeling, riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. management and portfolio construction. Fidelity Canada. Risteard Hogan has joined existing portfolio manager Doug Lober as co-manager. Hogan joined Fidelity’s International Equity Division in 2006. In 2010, he began managing the financials sub-portfolio for Fidelity International Equity Central. He started managing Fidelity Europe in 2012, and in 2013, assumed management responsibilities at Fidelity Europe Capital Appreciation, Fidelity Advisor Europe Capital Appreciation and the Europe sub-portfolio of Fidelity Global Balanced. Select Insurance. Peter Deutsch has been named sole portfolio manager, having co-managed the fund alongside Court Dignan since June 2013. (Dignan will remain manager of Fidelity Mid Cap Value.) Deutsch came to Fidelity in 2010 as a regional bank sector analyst. He is currently responsible for coverage of all domestic large-cap insurance companies. Fidelity Advisor Capital Development. Matthew Fruhan replaced Harlan Carere as manager of this $3 billion fund. Fruhan will continue to manage Fidelity’s Mega Cap Stock, Large Cap Stock and Growth & Income funds. (This change went into effect mid-December, 2013.) Fidelity Introduces Event-Driven Funds On December 18, Fidelity announced the launch of two new actively managed funds that will aim to capitalize on mispriced assets as a result of specific events, such as spinoffs, mergers and acquisitions, restructurings and proxy battles. The Fidelity Event Driven Opportunities Fund and Fidelity Advisor Event Driven Fund will be managed by Arvind Navaratnam, who joined Fidelity in 2010 and has a background in private equity and identifying specific situations to invest in. The funds will have no limitation as to where to invest. Unlike funds restricted to certain sectors, regions, asset class or market cap size, Navaratnam can invest in equitiesThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. or bondsA 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. depending on the specific circumstances afforded by special situations, a sampling of which you can see in the table below. A number of the opportunities will come from the massive market turnover created when large index funds (“passive funds”) are forced to sell out of a position, but Navaratnam will also be looking for undervalued companies or burgeoning opportunities that come from times of change in an index or company. Sources of Potential Opportunity Event Potential Opportunity Corporate Spinoffs Creation of an independent company through the sale or distribution of new shares of an existing business/division of a parent company 1) Mispricing from forced selling by passive funds may create favorable entry points 2) Focused management teams at the new entity Activist Investing/13D Filings Required SEC filing when an investor purchases 5% or more of a company’s shares Differentiated view of the impact an activist investor may have on advocating and effecting change over time Index Deletions When a firm is deleted from an equityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. index, such as the S&P 500 1) Mispricing from forced selling by passive funds may create favorable entry points 2) May create under-appreciated stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. with low investor expectations Source: Fidelity. The Fidelity Advisor Event Driven fund can only be purchased through brokers, but the Event Driven Opportunities fund is available to individual investors for a $2,500 minimum initial investment. It charges 1.30% a year in operating expenses. These funds represent an interesting approach to the markets, and Fidelity has the research resources to give Navaratnam a huge array of data and opportunities to parse when building out the portfolios. How well he does so will determine the funds’ success—we’ll be watching. About Adviser Investments Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual 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., fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, 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., foundations and institutions meet their investment goals. Our minimum account size is $350,000. 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