Fidelity Investors Not Spooked by Change at One of Its Hot Funds

The $17.8 billion (FDEGX Quote)Fidelity Aggressive Growth fund boasts a knockout track record and is the third-best-selling fund this year. But if you buy shares now, you might be committing one of the cardinal sins of mutual-fund investing: buying a fund for its record after the manager who earned it blows town.

The fund's 48.2% annualized return over the past three years beat the S&P 500 index by more than 29 percentage points, surpassing a cool 98% of competing large-cap growth funds, according to Morningstar. But Erin Sullivan, the highly regarded manager who built that record, bolted on Valentine's Day to start her own hedge fund. Then, in a surprising move, Fidelity handed the reins to Bob Bertelson, a veteran manager with an undistinguished track record. In fact, Bertelson finished dead last in a ranking of Fidelity managers' performance over the past 10 years, released last week by Jim Lowell, editor of the independent newsletter, Fidelityinvestor.com.

"This is a textbook example of people buying the fund's record without paying enough attention to the manager. It's a tendency that's hard to fight," Lowell says. ...