Fidelity Investments will close its $63.8 billion Contrafund, currently its largest, to new investments as of April 28, Bloomberg reports. The fund has delivered an average annual return of 10% over the past five years, handily beating the S&P 500, which has averaged not quite 4% a year in that timeframe.
It is precisely these outsized returns that have attracted investors' attention; in the past 14 months through February, the fund has taken in $10 billion in net new flows.
Fidelity says the main reason Contrafund manager Will Danoff wants to close the fund is to protect his ability to deliver strong returns. Likewise, a second fund Danoff manages, the Advisor New Insights Fund, which has $5.5 billion in assets and has returned an average of 24% a year since its 2003 opening, will also close.
Closing these two funds, said Phillip Bullen, Fidelity's chief investment officer for large-cap core, is "in the best interest of shareholders [because] stabilizing cash flows" will help Danoff continue to deliver strong returns.
The recent surge of new cash, for instance, has forced the portfolio manager to move more than 10% of each of the funds into cash, and this has put a drag on performance. Indeed, "closing a fund is something we regularly look at when cash flows strengthen," added Fidelity spokesman Vin Loporchio. Currently, 10 of Fidelity's 381 funds are now closed.