A rare anniversary
Mutual fund managers don’t last 20 years, as a rule. Over time, they get pushed out or burn out in a job that comes with long hours and measures performance every day to the tenth of a percent. Others just decide to move on.
On that basis alone, it’s worth noting that Will Danoff has been sitting in the manager’s chair at Fidelity Contrafund for 20 years as of today. What’s worth an entire column is how Danoff beat the market for two decades and build Contrafund into one of the investment world’s biggest and most important stock mutual funds.
Danoff was a 30-year-old assistant on Fidelity Magellan when he was named to succeed Jeff Vinik as manager of Contrafund. Vinik had been promoted to lead Magellan, and Danoff took over his job of running a $300 million portfolio.
Today, Contra manages $61.8 billion for 4.1 million shareholder accounts, thanks to the fund’s long-term performance and customers who have bought more shares. Contra is by far Fidelity’s largest stock mutual fund, and it’s the industry’s biggest actively managed stock fund run by a single manager.
“He’s become the most important manager at Fidelity in the last 20 years, and certainly among the most important handful of people in the industry,’’ says John Bonnanzio, editorial director at Fidelity Insight, an independent investment newsletter.
Danoff believes the lessons he learned over 20 years are simple but powerful. Chief among them: acknowledge you will make mistakes, and learn from them.
He sounds like Peter Lynch when he talks about a strategy of searching for young companies with big potential and sticking with them for the long haul. “They don’t go up in a straight line,’’ Danoff says. “Just staying with them is one of the big lessons I’ve learned.’’
One stock he’s stuck with: Google Inc., currently Contra’s second-largest holding. Fidelity is Google’s single-largest stockholder, and Danoff’s fund accounts for half those shares by itself.
Danoff points out all the help he gets from analysts and assistants around the world running Contra’s portfolio, which is dominated by big-company stocks like Apple Inc. and McDonald’s Corp. But he is the lone manager ultimately responsible for Contra, which has beaten its Standard & Poor’s 500 benchmark over the years.
Contra has earned an average of 12.2 percent annually over a 20-year period that ended Aug. 31, better than the S&P 500’s average gain of 8.3 percent. Stretch that over two decades, and Danoff’s fund returned a total of 903 percent, compared to the index’s 393 percent.
Numbers like those aren’t unprecedented, but they’re rare as hen’s teeth. I asked the fund research firm Morningstar Inc. for a list of top-performing mutual funds over the past 20 years and then isolated those managed by a single person throughout. Only five funds, including Joel Tillinghast’s Fidelity Low-Priced Stock fund, performed better Contra.
But here’s an important catch: None of those other funds comes close to managing as much money as Danoff, which makes his job harder. In fact, Contra invests more money than all five other funds combined.
Danoff says Contra’s go-anywhere investment style helps. “I’ve been able to see more stories, more industries,’’ he says. And avoid some of the market’s trouble spots. “I’ve never had to own something because it was in my [fund’s] name,’’ he says.
Few fund managers celebrate a 20th anniversary. Fewer still beat the market so long.
Steven Syre is a Globe columnist. He can be reached at firstname.lastname@example.org.