Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Fidelity Investments sign on a building

Portfolio > Portfolio Construction

Fidelity Funds Seek to Make Bigger Bets on Individual Stocks

Your article was successfully shared with the contacts you provided.

Fidelity Investments is asking shareholders to sign off on a proposal that would allow 13 of the firm’s growth funds to exceed limits on the size of stakes in individual stocks.

The funds — which held almost $140 billion as of Nov. 30 — already have relatively large holdings in tech giants including Apple Inc., Inc. and Microsoft Corp.

If shareholders approve the proposal filed last week, the growth funds would be able to buy even more shares in these companies and take advantage of this year’s market declines. A spokesperson for Boston-based Fidelity declined to comment.

The largest U.S. tech companies have all slumped this year, with Apple and Amazon tumbling 21% and 47%, respectively, through Wednesday’s close.

Apple, Microsoft and Google-parent Alphabet Inc. “account for very big portions of the large-growth universe,” Morningstar Inc. strategist Robby Greengold said in a phone interview. “It has been very difficult for any growth manager to be overweight these stocks” because of mutual fund rules on diversification, he said.

The filing didn’t specify which positions Fidelity might seek to bolster.

Risk, Volatility

Most mutual funds elect to be diversified, a status that investors often associate with less risk and volatility. Under those rules, the funds must limit the number of individual investments that equal more than 5% of their net assets — such stakes can’t constitute more than a quarter of total net assets.

Diversified mutual funds held about 92% of the industry’s $24 trillion of total assets as of 2020, the U.S. Securities and Exchange Commission told Congress in February. Yet some growth funds have re-classified themselves as “non-diversified,” freeing them to exceed the 25% ceiling.

T. Rowe Price Group Inc., for example, got shareholder approval last year to reclassify its Blue Chip Growth and Growth Stock funds as non-diversified. Blue Chip Growth held almost half of its assets in stakes of more than 5% at the end of September, while Growth Stock equaled about 32%, according to investor reports.

Fidelity’s board has already approved the re-classification. If shareholders agree, it will take effect May 1.

(Image: Shutterstock) 

Copyright 2022 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.