Saturday, July 30, 2011

Investors Behaving Badly

From its name to its strategy to its battle-tested manager's background as a high-yield credit researcher, Fidelity Leveraged Company Stock lives (FLVCX) and dies by its mandate.

Twenty-two year Fidelity veteran Tom Soviero has run this unusual mid-cap blend fund since July 2003, delivering wildly volatile yet in some ways utterly predictable performance. En route to a category- and benchmark-shellacking cumulative return of nearly 153% between his arrival and June 2011, the fund has enjoyed approximately 1.3 times the category's gains--and an almost exactly proportionate share of its losses.

Just as predictable: As they often do with such volatile vehicles, investors have had a difficult time using this fund well. The mammoth gap between its 10-year total return (13.6%) and investor return (3.2%) makes it a nearly perfect example of the kind of funds that reward the kind of patience not many investors actually have.

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