Fidelity to reopen popular fund pair

Goal is to replace retiring investors

Fidelity Investments will reopen to new investors two of its better known mutual funds that lately have been battered by the market downturns: Fidelity Contrafund and Fidelity Low-Priced Stock fund.

The reopenings are intended to bring in a new generation of investors to replace those who are retiring and withdrawing their money from the funds, said Walter Donovan, president of equities for the Boston mutual fund giant.

"The big driver here is the demographics of both funds," Donovan said in an interview yesterday.

Fidelity had closed Contrafund to new investors in 2006 and Low-Priced Stock fund in 2003, when both had become so big the company felt the funds' managers would have a hard time finding new stocks to buy if much more money poured in.

Contrafund's total assets stood above $80 billion last year, for instance.

Now, they could use new cash, given how hard they have been hit by the market's steep declines. Though with $47.7 billion Contrafund remains Fidelity's largest equity fund, it has lost 43 percent of its value this year through Monday, according to Chicago research firm Morningstar.com. The $17.8 billion Low-Priced Stock fund has lost 46 percent of its value in the same period. Another flagship fund Fidelity opened to new investors earlier this year, Magellan, also has faired poorly, losing 56 percent of its value 2008.

Meanwhile, the Standard & Poor's 500 index, a broad measure of stocks, has fallen 42 percent this year to close at 848.81 yesterday.

Investors have fled in turn. Net withdrawals totaled $4.6 billion from Contrafund, $2.9 billion from Low-Priced Stock fundand $3.2 billion from Magellan for the nine months ended Oct. 31, according to estimates by Morningstar. Many other mutual funds across the industry have seen large outflows as individual investors spooked by the market declines have scrambled to hold cash, municipal bonds, treasuries, and other less-volatile instruments.

Both the market losses and investor withdrawals have stressed Fidelity and other mutual fund companies because their revenue and profits are tied to the amount of assets they have under management. Fidelity last month disclosed plans to lay off 3,000 of its workforce of 44,400 worldwide. Other companies have also laid off workers, including MFS Investment Management and Putnam Investments, both of Boston.

Fidelity now has just six funds remaining closed, including Diversified International fund and Growth Company fund.

Contrafund and Low-Priced Stock fund had been among Fidelity's best performing equity funds, with Contrafund in particular often beating both its peers and its benchmark index significantly in recent years.

Low-Priced Stock fund's longtime manager, Joel Tillinghast, tries to buy stocks priced at $35 or less per share. Contrafund's veteran manager, Will Danoff, meanwhile, uses a contrarian mandate to buy shares of companies he considers undervalued. Both funds will reopen Dec. 16.

John Bonnanzio, editor of the Fidelity Insight investment newsletter, said Fidelity's latest reopenings show how the company is trying to bring back scared investors. "Both Contra and Low-Priced had outflows because of investors' aversion to owning stocks," he said.

Ross Kerber can be reached at kerber@globe.com.