Fidelity’s New President - Adviser Investments

Fidelity’s New President

Fidelity’s New President

Last Friday, February 20, Fidelity Investments announced that Charles Morrison would succeed Ronald O’Hanley as president of the company’s Asset Management division. The appointment comes a month after O’Hanley unexpectedly decided to leave the firm.

Our impression of Morrison, 53, former president of Fixed-Income and vice chairman of Pyramis Global Advisors, is that he will be a good fit for the new role. His responsibilities will include overseeing Fidelity’s investment divisions—including the firm’s lineup of mutual funds—totaling $1.9 trillion in assets. It’s a mission critical posting, one that will see him helping with future investment product development, as well as offering support to Fidelity Investments President Abigail Johnson.

Morrison is a Fidelity lifer, having joined the firm as a corporate bond analyst in 1987 after earning his MBA from Harvard Business School. He began managing Trust accounts in 1990 and was promoted to vice president of Fidelity Management Trust Company in 1992. During this time, he was responsible for managing a variety of short-term and broad-market bond portfolios. From 1995 to 2002, Morrison managed a handful of Fidelity’s bond funds, including Short-Term Bond, Spartan Short-Term Bond and the Advisor Short Fixed Income fund. He also managed the fixed-income sleeves of the Asset Manager and Asset Allocation series of funds. In 2002, Morrison took on his first leadership role at Fidelity, overseeing several strategic projects for the company and as head of the Bond Group. From 2004 to 2009, he served as president of Fidelity’s Money Market Group.

As mentioned above, we think this is good news for Fidelity. While investors in the firm’s funds will not notice any changes as a result of Morrison’s promotion, he has a deep appreciation for the firm’s culture, an understanding of what it takes to manage mutual funds and the ability to give Fidelity’s managers and clients the support they need. We’re interested to see what this new era for the firm brings.

Fund Mergers at Fidelity and Vanguard

This week we have news on mergers at both Fidelity and Vanguard. Fidelity’s move to combine two funds is fairly straightforward, while Vanguard’s merger seems more advantageous for the firm than shareholders.

Fidelity Combining Two Europe Funds

On March 21, Fidelity plans to merge Europe Capital Appreciation and its Advisor-class clone into its Europe fund. Existing shareholders in Europe Capital Appreciation (which has been closed in anticipation of the merger) will have their shares converted automatically to shares of the Europe fund.

When you compare the two funds, the merger makes a lot of sense. To start, they are both managed by the same pair of co-managers, Risteard Hogan and Stefan Lindblad. When you look under the hoods of the portfolios, the similarities grow: They both fall into the large-cap category, and they have nearly identical top-10 holdings, sector allocations and performance over the last one-, three- and five-year periods. Europe Capital Appreciation charges slightly more in expenses, 1.09% vs. Europe’s 1.06%, but otherwise, the two funds are more or less interchangeable.

It seems logical for Fidelity to streamline its fund lineup and combine the two funds’ assets. Europe Capital Appreciation is the younger and smaller of the two funds, with $362 million to Europe’s $1 billion, so it will end its run just over 20 years after its inception at the end of 1993.

While we feel regional funds like this are generally not the best choices for a diversified portfolio, we do not feel shareholders in either fund have much reason for concern at the merger.

Vanguard Merges Two Growth Funds

On February 24, Vanguard merged the assets of its Growth Equity fund into its U.S. Growth fund, also moving Growth Equity’s two sub-advisers, Baillie Gifford and Jennison Associates, to U.S. Growth’s management roster, where they join existing co-managers Delaware Investments, Wellington Management and William Blair and Co.

We first covered the proposed merger in our October 25, 2013 issue of the Adviser Fund Update, and our feeling on the maneuver hasn’t changed in the intervening months. The newly reimagined U.S. Growth fund does not seem likely to benefit from the additional management teams. Under its new structure, it has the makings of a multi-managed, index-like mess.

Vanguard said the move was about “cleaning house” and simplifying its fund lineup. We would argue that to clean house, you need to actually throw some things away. By keeping Growth Equity’s management teams, Vanguard has done the equivalent of sweeping the fund’s poor performance track record under U.S. Growth’s rug. The mess is still there, you just can’t see it—for now. Unfortunately for investors, U.S. Growth has not exactly had a stellar run of success either. We would steer clear of the fund.


About Adviser Investments
Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFs, fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trusts, foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016.

For more information, please visit or call 800-492-6868.

Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

The Barron’s rankings consider factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. This award does not consider client experience and is not indicative of future performance.

Editors at the Financial Times bestowed “elite” status on 300 firms in the U.S., as determined by assets under management, asset growth, longevity, compliance record, industry certifications and online accessibility.

© 2018 Adviser Investments, LLC. All Rights Reserved.