Fidelity's Vanderheiden Retires

Updated from 11:02 a.m. EST

Fidelity Wednesday announced the retirement of George Vanderheiden, who manages three funds and $36 billion for the $589.1 billion Boston fund heavyweight.

However, Vanderheiden, 54, will stay with the company as a director of FMR Corp. and will mentor junior portfolio managers.

Vanderheiden is best known for the $7.2 billion (FDESX)Fidelity Destiny I, which he's managed since 1980. The fund, which carries a front-end load and requires systematic investment, typically makes opportunistic shifts between value and growth stocks and its 19.1% 10-year average annual return tops the S&P 500 and 99% of the fund's large-cap value peers, according to Chicago fund tracker Morningstar.

More recently, however, the fund's performance has sagged. Vanderheiden couldn't justify buying technology shares at thin-air valuations and the fund posted a paltry 5% return last year.

He also manages Fidelitys' $24.7 billion (FAGOX)Advisor Growth Opportunities, which carries a 5.75% front-end load, and posted a 3.9% return last year. He also manages a clone of this fund, the $1.9 billion VIP: Growth Opportunities, for variable annuity investors.

In 1998 and 1999 Vanderheiden came under fire for poor performance. Last year the fund's shareholders approved the removal of performance-based fees on the fund. Still, he says his retirement from portfolio management is voluntary.

"My decision to leave has been my own. I've been thinking of it for the past year or so. I've had rough spots over the past 20 years, but I know if I stayed, I'd sail through it," he said in a conference call this morning.

In 1998 Vanderheiden took the summer off. At one point he managed seven funds and $45 billion, but says he requested a lighter workload over the past years as he began to feel "time poor."

Vanderheiden's departure kicks off a lengthy management shuffle. Karen Firestone, manager of (FLCSX)Fidelity Large Cap Stock and Advisor Large CapStock, will take the Destiny I reigns.

Bettina Douluton will leave (FEQTX)Equity Income II and (FPURX)Puritan to take over Fidelity Advisor Growth Opportunities and its clone.

Stephen DuFour will leave (FBALX)Balanced fund to take over Equity Income II and Robert Ewing will leave (FIDSX)Select Financial Services and (FAFDX)Advisor Financial Services to take over Balanced. Stephen Petersen will take over Puritan and keep managing Equity Income.

Ewing's promotion from Fido's sector fund ranks led to changes there as well.

James Catudal will leave (FSESX)Select Energy Service to take over the financial sector funds. Mathew Grech will leave (FSELX)Select Electronics to take Catudal's place at Select Energy Service. Brian Hanson, a health care and technology analyst, will take over Select Electronics.

Fidelity officials don't expect significant portfolio changes with new managers, but do say Destiny may focus more on growth stocks under Firestone's watch.

Vanderheiden's retirement is effective Feb. 1.

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