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Fidelity team loses 'franchise player'

MUTUAL FUNDS REPORTER

Star mutual fund manager Alan Radlo has left Fidelity Investments Canada Ltd., a surprising departure that some observers say may threaten the money manager's turnaround strategy.

Widely regarded as the face of Fidelity in Canada, Mr. Radlo oversaw about 25 per cent of the fund company's $37.5-billion in retail assets under management. The 17-year Fidelity veteran played a major role in the management of three Fidelity funds, including the $6.6-billion Fidelity Canadian Asset Allocation Fund.

Fidelity declined to discuss the details of Mr. Radlo's departure and the 50-year-old Boston-based money manager was unavailable for comment.

But sources said Mr. Radlo's demeanour was increasingly at odds with Fidelity senior management.

The rift led to his resignation on Monday after receiving his annual bonus, they said. For example, Mr. Radlo is an outspoken investor willing to discuss stocks he holds; in contrast, Fidelity is considered a bureaucratic firm whose management team does not speak about specific equities.

Mr. Radlo, considered a top-ranked fund manager, is single and described by friends as a workaholic, and is expected to launch his own Canadian investment fund in 2007.

An experienced team will take over management of Mr. Radlo's funds effective immediately, Fidelity said.

Bob Haber, Fidelity's chief investment officer, replaces Mr. Radlo as the lead portfolio manager on the Canadian equity subportfolio of Fidelity Canadian Asset Allocation Fund.

Cecilia Mo replaces Mr. Radlo as the portfolio manager on the Fidelity NorthStar Fund, along with Joel Tillinghast and Chris Goudie. And lastly, Maxime Lemieux replaces Mr. Radlo as portfolio manager on the Fidelity Canadian Growth Company Fund.

There may be some "subtle" changes to the equity holdings of the three funds, Mr. Haber said.

"We don't envision in any of these portfolios a massive turnover," he said. "The spirit of what Alan did is large-cap Canadian securities and we will keep that."

Mr. Radlo's departure follows a long period of rebuilding at Fidelity, the Canadian subsidiary of Boston's Fidelity Investments.

Under the leadership of president Robert Strickland, the Toronto company has increased its marketing and advertising presence, launched new products and improved its relationships with financial advisers. Mr. Radlo and funds under his management had little or no role in new initiatives.

The company's efforts are working. Year to date, the firm reported net sales of about $430.7-million to the Investment Funds Institute of Canada. In contrast, the firm reported net redemptions of about $1.2-billion for the same 11-month period in 2005.

"Sales momentum in the Canadian mutual fund business comes with firing on all cylinders," Mr. Strickland said. "Investment management is . . . just one of the parts. The reality of this transition is we are going from high-quality investment management to high-quality investment management."

Nevertheless, a number of industry observers said the loss of Mr. Radlo is bad news for the company.

"The star manager is leaving and it's tough not to spin this as a loss," said Peter Loach, fund analyst at BMO Nesbitt Burns Inc. in Toronto. "Was it the person [who] drove the returns or was it the organization? I can tell you from experience it's people who drive the returns."

Mr. Radlo's exit "leaves a big hole" and may hurt short-term fund sales, said Chris Reynolds, president of Investment Planning Counsel Inc., a Mississauga-based wealth management firm with about 500 financial advisers.

"They have lost a franchise player," said Raynor Burke, head of fund research at National Bank Financial Inc. He said Ms. Mo has limited investment experience and manages less than $200-million; she will now be overseeing a large chunk of the $4-billion NorthStar fund.

Dan Hallett, an independent fund analyst and fan of Mr. Radlo, has placed the funds under review. "I don't think it will have a huge impact on their [Fidelity's] momentum, but the bottom line is he was a major factor in three of their larger funds," Mr. Hallett said.

© 2007 The Globe and Mail. All rights reserved.

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