In yet another sign that this bear market is hurting fund shops and fund investors alike, a pack of stock-pickers left a couple of giant Boston fund shops this week -- not all voluntarily.

On Thursday,

Fidelity

, the nation's largest fund shop with more than $570 billion in its retail stock and bond funds, announced the departure of two veteran fund managers: Gregory Fraser and Timothy Krochuk, who are reportedly leaving to start their own hedge fund shop. Hedge funds are unregulated investments where managers have more leeway to sell stocks short, a strategy for profiting from falling stock prices.

A day earlier Laurence J. Lasser, chief executive of

Putnam Investments

, the nation's fourth-largest fund shop with about $205 billion in its retail stock and bond funds, sent a memo to employees announcing plans to lay off 256 people, or about 4% of the firm's workforce, to curb costs. Fund company layoffs rarely reach investment staff, but according to news reports five fund managers were dismissed at Putnam this week.

The upshot for fund investors: As a falling market is shrinking fund company assets and fee income at firms large and small, don't be surprised if you see ambitious fund managers heading for the hedge fund world, while struggling colleagues are swept under the carpet.

Putnam's media relations office was closed for the holiday, but a Friday report in the

Boston Globe

noted that up to five portfolio managers had been dismissed, in addition to analysts and traders.

A look at Putnam's Web site turns up three missing managers on big Putnam funds: Charles Swanberg, co-manager of the $31.5 billion

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Putnam Voyager fund; Anthony Santosus, co-manager of the $8.9 billion

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Putnam Vista fund; and David Carlson, co-manager of the

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Putnam Health Sciences fund. All three were senior members of a lackluster fund's management team. (Full disclosure: I own shares of the Voyager and Health Sciences fund in an IRA account.)

Swanberg joined the massive Voyager fund's team back in 1994. The fund's record since has been underwhelming, tracking with or just behind the average large-cap growth fund, according to

Morningstar

. The fund, buckling under the weight of a more than 50% stake in the once-hot tech and telecom sectors, has a 12.6% five-year annualized return that trails its average peer and the

S&P 500

. Over the past 12 months, the fund is down more than 29%, trailing the S&P by some 11 percentage points.

Santosus had worked on the Putnam Vista fund, which focuses on mid-cap growth stocks, longer than the fund's other three managers. The fund's 12.6% five-year annualized gain narrowly beats its peers, but lags them over the past one- and three-year periods, according to Morningstar. The fund's tech stake was whittled down to 29% at the end of February, from 50% at the middle of last year, according to Morningstar.

Carlson had co-managed the Putnam Health Sciences fund since 1997, but the fund has lagged its peers over the past one-, three- and five-year periods.

The names of other dismissed managers, if there are more, are unknown at this time, but analysts and at least one equity trader were dismissed as well, according to people familiar with the situation.

The layoffs aren't unexpected, since fund companies' earnings are driven by fees on assets under management. The past year's steep selloff has reduced fund companies' assets and triggered investor redemptions, as well. At the end of February, Putnam's retail stock and bond funds had $205.2 billion, down significantly from the $256.2 billion they had a year earlier, according to Boston fund consultancy

Financial Research

.

The list of other fund shops laying off staff includes

Janus Capital

, last year's top-selling fund shop.

Fidelity's departures appear voluntary. Fraser and Krochuk, the Fidelity emigres, join Jeff Wrona, former manager of the

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PBHG Technology and Communications fund, and John Schroer, former manager of the

Invesco Global Health Sciences

fund, as the latest managers to leave mutual funds to start their own hedge fund operations.

A slew of tech- and growth-fund managers made similar moves after adding 1999's fat returns to their resumes. Fidelity lost Erin Sullivan and Andrew Kaplan, while Frank "Quint" Slattery left

PBHG Funds

and Brian Stansky quit his telecommunications fund at

T. Rowe Price

. These folks understood that their valuations tracked with the Nasdaq's and knew both had peaked.

Many would conclude that this more recent exodus is driven by struggling managers' desire to have a clean slate so they can short or bet against stocks, a practice frowned upon at most fund companies. Wrona's old fund, for instance, is down more than 65% over the past 12 months.

That doesn't appear to be the case with Fraser and Krochuk, two managers who rely on strict quantitative and technical models that would appeal to sophisticated institutional investors who favor consistency over flash.

Fraser ran the

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Fidelity Diversified International fund since its inception at the end of 1991, as well as a broker-sold sibling since its inception in 1998. Using quantitative screens to uncover companies with unrecognized earnings potential, Fraser has beaten the average foreign fund in each of the last eight calendar years. The fund's 13% five-year annualized return beats 91% of its peers, according to Morningstar.

Krochuk, who also uses technical and quantitative analysis to pick stocks, has run the

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TechnoQuant Growth fund since its 1996 inception. Despite a feast-or-famine style, the fund's 6.2% three-year annualized return tops 85% of its large-cap blend peers and bested the S&P 500 by 2.7 percentage points, according to Morningstar.

He took the reins of the

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Small-Cap Selector fund, another quantitative fund, about a year ago. Over the past 12 months the fund is down 12%, lagging its average peer, but beating the S&P 500 by more than six percentage points.

The pair's departure triggered a series of manager shufflings.

William Bower will take over the Diversified International fund and its broker-sold sibling. Previously Bower had run the

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Fidelity International Growth & Income fund since 1998. Penelope Dobkin will take over Bower's old fund; she had run the

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Fidelity Worldwide fund since 1990.

Penelope A. Dobkin has been named portfolio manager of Fidelity International Growth & Income Fund, succeeding Bower. Dobkin has managed Fidelity Worldwide Fund since 1990. Richard Mace, Jr., will take over the Worldwide fund, while still managing the

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Fidelity Global Balanced fund, the

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Fidelity Overseas fund and a broker-sold sibling.

John Chow, a quantitative specialist, will replace Krochuk on the Fidelity TechnoQuant Growth fund and its broker-sold sibling, the Fidelity Advisor TechnoQuant Growth fund. Chow will continue to manage the stock portion of the

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Fidelity Asset Manager: Income fund, which he has run since May 2000. James Harmon will take Krochuk's place on the Fidelity Small Cap Selector fund. He has run the

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Fidelity Small Cap Retirement fund since last September.