A Case of Asset Bloat?

published 29 December 2006

Editor's note: This is part of a continuing series of articles looking at the 20 biggest no-load stock funds.

Is bloat catching up with Fidelity Diversified International? Since shutting the door to new clients in October 2004, assets have ballooned from $18 billion to nearly $46 billion. But after having outpaced the average diversified overseas fund for 13 straight years, Diversified International lagged its average rival by two percentage points in the first 11 months of 2006.

Manager Bill Bower says asset growth isn't responsible for the lackluster '06. Instead, he blames the sluggish performance on his decision to cut back -- prematurely, as it turned out -- on his holdings of emerging-markets stocks. "I got too defensive, too early, and it cost the fund a little bit," he says. Bower spreads his portfolio across 350 stocks, mostly of large companies in developed countries. He doesn't make big-picture judgments on countries or their sectors. "Instead of making industry or geographic bets, I want to own the best stock in a given industry in every part of the world," says Bower, who took over Diversified International in 2001 after a four-year stint at Fidelity International Growth & Income (now called Fidelity International Discovery).