Asset Manager was hurt by growth fund competition A once-bountiful fund shrank by $72 million in first 11 months of '95

January 14, 1996|By BOSTON GLOBE

Even amid the elite cluster of Fidelity Investments mutual funds that could pull in business like a vacuum, Bob Beckwitt's Asset Manager stood out as a spectacular success.

Starting from scratch in the last days of 1988, Mr. Beckwitt amassed $11.1 billion in Asset Manager in just six years and spinoff funds managed another $6.6 billion by the end of 1994.

But the concept that pulled in billions of dollars in new business annually for Fidelity has hit the wall for a full year now.

Asset Manager actually shrunk by $72 million through the first 11 months of 1995, even though the fund's investments were earning 15.71 percent and other popular Fidelity vehicles continued to enjoy explosive growth.

Most asset allocation funds like Asset Manager, which spread their money among stocks, bonds and short-term investments, were a distant second choice compared with thriving growth funds last year.

But Mr. Beckwitt was also saddled with a potent backlash from the fund's losses in late 1994, caused by risky fixed-income investments from Mexico and Argentina.

It wasn't the financial setback that hurt Asset Manager so much as the way money was lost. Many unsophisticated shareholders who believed they bought a conservative, all-in-one investment discovered they were on the wrong end of big bets in Latin America.

"It has a black eye, but the concept is good for the retirement market," said William M. Dougherty of Kanon Bloch Carre, a Boston firm that analyzes funds used in retirement plans. "They just didn't execute it."

Asset Manager has been a favorite in Fidelity's powerful retirement account business, trailing only the Magellan and Puritan funds among 401(k) customers.

Fidelity marketing executives said the larger trend of 1995 favoring growth funds was the biggest factor working against Asset Manager and other similar funds.

"The industry in total is off significantly for some of the more conservative equity funds," said Neal Litvack, Fidelity's executive vice president for retail marketing.

"Where they do extremely well is in less sharp [market rallies] than last year or when there is a tremendous amount of volatility."

Mr. Litvack said 95 percent of the money that exited Asset Manager moved into other Fidelity funds, and 80 percent of that settled in stock funds that were typically more aggressive.

But Asset Manager has attracted plenty of customers during other strong stock markets, despite investment results that seemed pokey at the time.

It got off to a rousing success in 1989, when its 15.28 percent total return was about half the Standard & Poor's 500 results. The fund grew from $372 million to $1 billion in 1991, when it performed well below the S&P's 30.47 percent advance.

Asset Manager beat a hasty retreat from foreign markets after the Latin America debacle of 1994, shrinking its international exposure from 31 percent to 12 percent within three months.

Asset Manager's cash and other lower-yielding short-term investments swelled, but Mr. Beckwitt has since moved money back into international markets.

The fund's concentration of short-term investments at first and, later, a greater exposure in unimpressive foreign markets made for another weak year in 1995, when it ranked 136 among 150 flexible portfolio funds measured by Lipper Analytical Services Inc.

Combine that with the loss of 1994 and Asset Manager ranked 95 in a Lipper field of 99 funds for the two-year period of 1994-95.

But just how to categorize Asset Manager has become a matter of debate.

The fund's level of foreign holdings led Morningstar Inc. this year to move Asset Manager into a new category, called "multi-asset global," along with such funds as Merrill Lynch Global Allocation, SoGen International and Blanchard Global Growth.

"It fell behind domestic asset allocation vehicles [in 1995] but relative to its peer group it didn't do that badly," said analyst Amy Arnott of Morningstar.

Asset Manager's strategy today still counts on a foreign flavor, with 25 percent of its assets invested internationally as recently as six weeks ago. But the aggressive edge has been tamed. Germany and Japan are its biggest foreign markets now.

Mr. Beckwitt, who declined to be interviewed, wrote in Asset Manager's Sept. 30 annual report that international investments were in the portfolio to stay:

"If there's a lesson in the fund's recent bad experience with foreign investments, it's this: More diversification is needed, not less."

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