My Response to Divided Fidelity News

February didn’t just see a return of volatility to the markets. There was volatility in Fidelity-related headlines, too. Case in point: In the same month Kiplinger Magazine published Fidelity’s Stock-Picking Culture is Alive and Well (on February 1), The Wall Street Journal released its article, Fidelity May Abandon Its Star Stock-Picker System After Harassment Claims (on February 26).

According to The Wall Street Journal, Fidelity is thinking of moving toward a more group-based, collaborative approach from its current system, which emphasizes individual managers. The Journal further claimed that the move was prompted by claims of sexual harassment and other undesirable workplace behaviors in the stock-picking unit.

Never have I seen two well-respected investment publications present such diametrically opposed views on Fidelity’s managers and stock-picking culture—and my professional recollection of all things Fidelity goes back to May 1990.

As I explain in the March 2018 issue, of the two claims, I think Kiplinger gets it better. And while I think the WSJ is right to note a greater emphasis on teamwork and even team management, I think trying to conflate a management issue (how to manage managers better so that harassment claims go to zero) with a possible need to change how Fidelity manages stock-picking felt more salacious than substantive. My view: Any rumor of the death of Fidelity’s stellar stock-picking culture, products and results is greatly exaggerated.

Fidelity has had several team-managed products over the years: Balanced funds, Asset Allocation funds, any number of bond funds. They haven’t stopped launching team-managed products, with their
Factor ETFs as the most recent addition. And even if you drill down to the one manager and fund I think every investor should own, Joel Tillinghast at Low-Priced Stock (FLPSX), you know that he added four or five members to his fund, and that they have been running 5% of Low-Priced Stock for years. I’ve noted time and again that Joel’s decision is mirrored in other Fidelity funds, reflecting a direct approach to solving an issue that many other firms ignore—that, sooner or later, this generation of stellar stock pickers will retire. Fidelity management, managers and culture are already engaged in turning that kind of problem into an opportunity.

As I told InvestmentNews on February 28, “[Fidelity is] doing the right things to make sure of the consistency of their meritocracy and to ensure that most don’t just beat their benchmarks, but their peer groups.”