Boston Globe take on it.
Rising star exits Fidelity to start hedge fund
By Beth Healy, Globe Staff, 2/15/2000
The manager of Fidelity Investments' white-hot Aggressive Growth fund left the firm yesterday to start her own hedge fund.
Erin Sullivan, 29, who has run the $17.2 billion fund since 1997, delivered investors a spectacular 103 percent return last year. Her departure stunned Fidelity watchers and sparked a domino effect of management changes, as the fund giant sought to fill her high-profile job.
'Not since Jeff Vinik left have I felt the kind of tremor I felt today,' said James Lowell, editor of FidelityInvestor
.com in Needham. 'It sends a disconcerting message.'
Vinik quit Fidelity's Magellan fund in 1996, after coming under attack for betting heavily in bonds and disappointing investors. Sullivan leaves under considerably different circumstances - a rising star who wants to run her own fund rather than climb the ladder at the nation's biggest fund firm.
'After 81/2 years of invaluable experience at Fidelity, I have decided to become an entrepreneur,' Sullivan said in a statement.
Hedge funds are unregulated portfolios that permit managers to invest with few rules. Vinik and other famous mutual fund managers now run hedge funds, where they typically earn 20 percent of the profits they generate for wealthy customers.
Under Sullivan's watch, Aggressive Growth loaded up on technology stocks and beat the Standard & Poor's 500 index by a wide margin in 1998 and last year. The fund grew tenfold from $1.7 billion in 21/2 years.
Fidelity named Robert Bertelson, manager of Fidelity's OTC Portfolio, to succeed Sullivan. His fund, which also invests in Nasdaq-traded technology stocks, notched a 72.5 percent gain last year but lagged the Nasdaq index's 86.1 percent climb.
Said Lowell, 'I think it's very questionable news for Aggressive Growth shareholders.'
Fidelity spokeswoman Ann Crowley noted that Bertelson beat 84 percent of midcap funds in the market.
'We're always sorry to see talented people go,' Crowley said. 'But we have an extensive team of people, a very deep bench, and a great record of training and developing management talent.'
Taking Bertelson's place on the $11 billion OTC Portfolio is Jason Weiner, manager of Fidelity Contrafund II. That fund gained 42.5 percent last year, double the performance of the S&P 500, and outpaced 82 percent of its peers, Fidelity said.
Lowell considers Weiner one of Fidelity's top five stockpickers and called the move positive for OTC fund investors. He believes Fidelity lost its best stockpicker when Sullivan walked out the door.
Sullivan's departure raises questions about fund firms' ability to hold onto top talent when the market is soaring. Her performance, while excellent, may be good enough to sell outside Fidelity, but it was racked up in less than three brief years. She did not have to see the fund through a down market.
Observed Lowell, 'To be the manager of a hedge fund is not a piece of cake.'
This story ran on page C01 of the Boston Globe on 2/15/2000.
¸ Copyright 2000 Globe Newspaper Company
boston.com
Big difference in leaving when the fund was down vs. hot. Will be interesting if she can get 1B in capital.
Jack |
