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Mutual Funds

Fidelity: We’ll Keep The Managers


I had written about Fidelity leaving (What to do about the In-Fidelity?) recently, and Manoj Nagpal has brought it to my notice (Thanks!) that Fidelity may take the fund management team with them.

This is a huge change from my earlier assumption that Fidelity was only exiting as an owner. It seems it is taking the managers with it.

Fidelity Mutual Fund, in its ‘request for proposal’ document, has stated it is keen to retain the equity fund management team headed by Alexander Treves. Fidelity Mutual will reach a final decision on its equity fund management team after taking into account the overall valuation of the deal, said a Fidelity insider.

Now there is no clarity on whether the fund management team will stay. In case they don’t, your only choice is to exit, or face a lot of uncertainty before the buyer finds a manager for each fund.

Will they let the management team continue? That looks increasingly impossible considering that Fidelity’s costs have killed its profitability and fund managers are likely to be a big part of those costs, and supposedly buyers have to pay for the non-manager-bloat as well:

A few leading domestic fund houses, however, did not bid for Fidelity’s assets as the acquirer, as part of the deal, has to give jobs to all members of the business management team, comprising marketing and sales personnel.

If I were an investor in a Fidelity fund right now, this would ring serious alarm bells, and I’d choose to exit. This is of course not a recommendation, choose wisely.


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