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Refreshing Our View of 2 Fund Giants Morningstar Research | Katie Reichart

of Fidelity’s marquee funds, the firm still could do more to smooth transitions across its sprawl- ing lineup. In contrast, T. Rowe has long been a model in the industry for how manager transitions should play out. Because managers often spend their careers at the firm, departures are typically retirements that are announced well in advance, allowing a months-long transition period for the incoming manager. Longtime T. Rowe Price Small-Cap Value PRSVX manager Preston Athey, for example, announced his June 2014 retirement in August 2012 . Some T. Rowe funds, including Gold-rated T. Rowe Price Mid-Cap Value TRMCX , have long had associate portfolio managers who work closely with the manager. Others, such as Gold-rated T. Rowe Price Capital Appreciation PRWCX , have moved in that direction as assets have grown. The associate portfolio manager role, while not used at all funds, offers backup and provides a logical successor. T. Rowe is not immune to unexpected departures. Kris Jenner of formerly Gold-rated T. Rowe Price Health Sciences PRHSX left to start his own hedge fund in February 2013 , taking two analysts with him. Taymour Tamaddon, a nine-year member of the health-care team, replaced him. T. Rowe has since filled the open slots on the health-care team, but with analysts still getting up to speed, the team is not as solid as before. Joe Milano, of formerly Gold-rated T. Rowe Price New America Growth PRWAX , also abruptly left in May 2013 to start up his own hedge fund after a successful run of nearly 11 years at the fund. Dan Mar- tino, who posted strong results during nearly four years at T. Rowe Price Media & Telecommunica- tions PRMTX , took over, though this is his first diver- sified charge. Despite those uncharacteristically abrupt changes at T. Rowe, the firm has tried to offer consistency where it can. Martino remained on board at Media & Telecom until September, helping smooth the path for his successor, Paul Greene, who was taking on his

Morningstar analysts recently visited Fidelity’s Boston headquarters and Baltimore-based T. Rowe Price. Below, we look at a few themes that jump out and how the two shops compare. Seeking Stability Frequent manager turnover has long been a criticism of Fidelity’s equity funds. (There’s been more consis- tency on the fixed-income side.) Analysts often shuf- fled between sector and industry funds to get their feet wet. In fact, Fidelity used to deliberately move an analyst to a sector fund where he didn’t have experi- ence for the sake of grooming better-diversified managers down the line. Fidelity has taken small steps to improve. In the mid- 2000 s it began hiring experienced sector managers who wouldn’t want to bolt for diversified funds, length- ening the tenure on some of its major sector funds. (The industry-focused funds still see a lot of churn.) Recently, Fidelity added comanagers to improve suc- cession planning and help handle capacity at its biggest funds. Will Danoff, who runs more than $ 100 billion between Fidelity Contrafund FCNTX and Fidelity New Insights FNIAX , chose John Roth as his comanager at New Insights. Gopal Reddy assists Steve Wymer at Fidelity Advisor Growth Oppor- tunities FAGAX . (Wymer also runs the much bigger Fidelity Growth Company FDGRX .) Joel Tillinghast selected a team to run Fidelity Low-Priced Stock FLPSX when he took a short sabbatical. The team has continued to run a small sleeve upon his return. Derek Janssen was named comanager of Fidelity Small-Cap Value FCPVX following huge asset growth at manager Chuck Myers’ two charges. (Both funds are now closed to new investors.) While these appointments add some clarity to the future