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Veteran Fidelity star takes a break

Tillinghast to go on 4-month leave; has led a top fund for over 20 years

By Steven Syre
Globe Staff / July 14, 2011

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Joel Tillinghast, one of the brightest stars at Fidelity Investments, plans to take a temporary leave of absence from the mutual fund he has run for more than 20 years.

The manager of the $36 billion Fidelity Low-Priced Stock fund will depart in September and plans to return to work four months later, at the start of 2012, said company spokesman Vin Loporchio. “We fully expect Joel to return in January,’’ he said.

Tillinghast, along with Fidelity Contrafund manager Will Danoff, are the two holdovers from the era when Fidelity superstar managers dominated the mutual fund business. They remain the best known and most powerful draws for investors and their money at Fidelity.

Tillinghast, 53, has earned spectacular returns for investors since he took over the Low-Priced Stock fund from its inception at the end of 1989. The fund has earned an average annual return of 14.5 percent, over 21 years through June 30, nearly double that of the stock market index that serves as Tillinghast’s benchmark; his total return for the period is 1,394 percent, compared with 406 percent for the index.

“I would argue he is one of the best managers not just of the current generation but of any generation,’’ said James Lowell, editor of Fidelity Investor, a newsletter that tracks Fidelity funds.

Tillinghast’s fund has ranked among the top 12 percent of its competitors ov er the past three years and among the top quarter of the field during the last five years, according to Morningstar Inc. The fund’s record over the past 10 years places Tillinghast among the top 4 percent of nearly 600 comparable managers.

Low-Priced Stock started as a mutual fund primarily focused on smaller stocks. But an influx of investor money into the fund over the years made it increasingly hard to own shares of small companies, and Low-Priced Stock was closed to new investors several times to manage the flow of cash.

Along the way, Tillinghast simply added an unusually large number of stocks to his fund’s portfolio, and he became known for his ability to keep track of business developments at hundreds of companies the fund owned. Low-Priced Stock currently reports owning 884 different stocks.

But even Tillinghast, with his exceptionally large portfolio, was unable to invest so much money in small companies and eventually bought shares of larger businesses. Today, Low-Priced Stock is considered a fund that mostly owns shares of mid-sized companies.

Tillinghast plans to use the time off to travel, work on a book on investing advice for individuals, and mentor junior money management professionals at Fidelity, Loporchio said.

He will be replaced temporarily on the Low-Priced Stock fund by Jamie Harmon, currently manager of the $5.3 billion Fidelity Advisor Small Cap Fund. Harmon will be assisted by four other sector fund managers.

Harmon has accumulated an impressive investment record of his own during the past five years. His fund has earned an average of 7 percent annually during that period, more than twice the gain of its benchmark index.

“Sometimes having a deep bench is a meaningless cliche,’’ said Lowell. “But in this case, the interim person they’ll be pulling off the bench carries a big bat.’’

Steven Syre can be reached at syre@globe.com.