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The Decline of Boston’s Investment Firms February 7, 2010

Posted by HubTechInsider in Investing.
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Boston is known as the home to a host of mutual fund firms, and Peter Lynch, of Fidelity Magellan fame, used to brag that he could do better at picking stocks than his peers based in New York. In 1989, Lynch wrote a bestselling (and a book I highly recommend) book, One Up on Wall Street. During Lynch’s tenure, from 1977 to 1990, Magellan gained 29% a year, compared with the 15% return on the S&P 500. Yet a February 2nd Bloomberg news report shows that mutual fund stalwarts such as Fidelity Investments, Putnam Investments, and MFS Investment Management have seen their overall share shrink over the past decade as traditional stockpicking has lost favor among retail investors and returns trailed some rivals. The three held 12% of the $6.9 trillion in equity and bond funds in December, down from 21% a decade earlier. Many in the industry are of the belief that the stockpickers didn’t do a very good job of sidestepping the two recent stock market bubbles.

Investors pulled $37 billion from actively managed stock funds last year, according to Morningstar. Much of that money found its way into bonds, index-tracking funds, or exchange-traded funds – categories where Boston’s big firms have never been strong. The damage has been more than reputational, with the city’s fund companies cutting employment and moving jobs out of state to lower costs.

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