At Fidelity, a tale of two funds

Fidelity Investments’ biggest stock fund, the $72.8 billion Contrafund, raised its exposure to beaten-down financial firms in January.

But Boston-based Fidelity’s best-known fund, Magellan, cut exposure to the sector, new data show.

And this divergence is encapsulated by the opposing bets made by those two funds on the world’s biggest institutional asset manager, State Street Corp., according to data posted on Fidelity’s website March 1.

Magellan’s exposure to State Street, which is embroiled in lawsuits tied to losses on mortgage market investments, dropped 86 percent, to $105.5 million, at the end of January from a month earlier. It was a top-10 holding last year of the $39.4 billion fund, run by manager Harry Lange.

Contrafund, however, raised its State Street holding to $174.3 million at the end of January, from just $771,400 at the end of December. Contrafund is run by Will Danoff.

Despite the lawsuits, Boston-based State Street has weathered the credit crisis well, relative to many peers. Its stock rose 19 percent in the last quarter of 2007 and in January rose 1.1 percent.
A Fidelity spokesman said the fund managers would not comment.

‘‘It’s not unusual to see two different Fidelity managers doing two different things,’’ said Dan Lefkovitz, an analyst at Morningstar. Although Fidelity has centralized research, he said, ‘‘managers also contribute a lot of their own insights and analysis.’’

Both Contrafund and Magellan are feeling the stock slump. Returns from both are down about 10 percent in 2008.
(Reuters)