Posted by: Adrienne Carter on April 3, 2006
I always applaud a fund company when it makes the shareholder-friendly move to close a portfolio. So I have to give props to Fidelity for closing the doors of one of its most bloated funds, the $68 billion Fidelity Contrafund.
Certainly, Contrafund and its manager Will Danoff have put up some stellar results in recent years. Huge bets on energy and savvy picks like Genentech and Marvell Technology made 2005 a banner year. It returned 16%, 10 percentage points more than other large-cap growth funds and 11 percentage points ahead of the S&P 500 index.
Chasing returns, shareholders (tsk! tsk!) poured into the fund in droves; Danoff’s two funds’ (he also runs Fidelity Advisor New Insights which also closed) have taken in over $12 billion in the past year.
Indeed, at $68 billion, Contrafund far outweighs Fidelity Magellan, the notoriously whale-like mutual fund that has struggled to even keep up with the index, much less beat it. So you have to wonder whether Fidelity should have shut out shareholders a long time ago. It already seems that Danoff is straying more and more from a multi-cap strategy to a large-cap centric one. At this size, Contrafund certainly doesn’t have much flexiblity.
So far this year, the fund is up 4.75%, beating the index by 1%. The question remains whether or not the fund can keep it up. Certainly Magellan’s fate doesn’t paint a rosy picture for Contrafund. Fidelity has surprised though, most notable Fidelity Low-Priced Stock. Manager Joel Tillinghast has managed to deftly manuever the small-cap arena with a whopping $38 billion. Here’s hoping Danoff can do the same.