Finance: MUTUAL FUNDS
CAN A LEGAL EAGLE HELP FIDELITY SOAR?
Its former top attorney must restore luster to the fund giant
Is Robert C. Pozen the best man for the biggest job in the mutual-fund industry? On Apr. 21, Fidelity Investment's top attorney became chief investment executive of the company's embattled mutual-fund operation, overseeing $500 billion in assets. The 50-year-old career lawyer is an odd choice for the job: He has never managed money. But Peter Lynch, the former star Magellan fund manager who is now a part-time Fidelity vice-chairman, says he's ready to pitch in if Pozen needs any advice. "If he wants a primer on investing, I'm happy to give him one," Lynch says.
Pozen replaced J. Gary Burkhead, who is widely viewed as having been reassigned because of the turmoil in the firm's fund operations. He will become president and chief executive of Fidelity's institutional business, which is now Fidelity's fastest-growing unit.
FORMIDABLE. Pozen's appointment may have been made in haste. The longtime confidant of Fidelity Chairman Edward C. "Ned" Johnson III had been pursuing a job in the Clinton Administration as deputy U.S. Trade Representative to Asia. Although he had not been formally nominated, a senior trade official says he was the only candidate being considered. Just days before getting his promotion Pozen was helping investigators conduct a routine background check.
Although Pozen would have spearheaded trade talks with China, his new assignment at Fidelity is no less daunting. He must improve the performance of the company's giant mutual funds, many of which have been lagging behind those of peers for the past three years. And he must stop a year-long exodus of fund managers that has heightened anxiety among Fidelity customers.
As top investment executive, Pozen will not manage money. But he will oversee the managers of Fidelity's 250 mutual funds and an overall staff of 458. While that's a long way from Fidelity's 140-person legal staff, Pozen brings formidable credentials to the job. In 10 years at Fidelity, he has been one of the company's top problem solvers, overseeing everything from personal trading by fund managers to expansion into foreign markets. His successful four-year effort to open the Japanese market to Fidelity's funds was a key reason why the Clinton Administration sought him for the trade position, an Administration spokesman says. Pozen is also one of the mutual-fund industry's most highly regarded attorneys, often taking the lead role in lobbying Washington on Fidelity and industry issues.
Still, some former Fidelity employees question whether he's right for the job. Fidelity is "struggling for leadership and vision, and they're still going without it" under Pozen, says one former top executive. A former fund manager thinks Pozen's lack of investment experience will not engender loyalty among the firm's star fund managers.
Pozen dismisses critics. "I'm not a stock-picker, but I am a good people manager," Pozen said in an interview. Although he will initially spend most of his time talking to fund managers, he offered little insight into how he will improve Fidelity's investment business. He wants to "distinguish more clearly between go-anywhere funds and funds with a distinctive investment style," but he didn't say how that might be accomplished.
FALLOUT. Pozen's appointment highlights the lack of executive depth in the investment operations. Burkhead had no second-in-command. Instead, William J. Hayes, U.S. equities chief, and the heads of fixed-income and high-yield units
all reported directly to Burkhead. Hayes's deputy, Bart A. Grenier, resigned the day Pozen was promoted to join a small firm launched by three ex-Fidelity managers. Grenier could not be reached for comment. His departure leaves Johnson's 35-year-old daughter, Abigail, who now oversees computer systems for the investment unit as well as a small group of top fund managers, as one of the investment group's highest ranking executives. Fidelity sources say she is a potential successor to Hayes.
Before tackling fund performance, Pozen says he'll need a few weeks to assemble his own management team. For now, he will only say: "My themes are continuity and stability." The continuity and stability Fidelity investors would like to see is a return to the kind of once golden investment results that left the competition in the dust.By Geoffrey Smith in BostonReturn to top