How MarketWatch chose its Mutual Fund Manager of the Year. Fidelity Canada’s Lemieux is Mutual Fund Manager of the Year.

Jan.29, 2008 in Market Outlook

Narrowing the field

How MarketWatch chose its Mutual Fund Manager of the Year

By Jonathan Burton, MarketWatch

Last Update: 7:30 PM ET Jan 29, 2008

SAN FRANCISCO (MarketWatch) — Maxime Lemieux was not an obvious choice for
MarketWatch’s Mutual Fund Manager of the Year award, and in part that makes his
win all the more appealing.

Country funds like Lemieux runs can be narrowly focused and subject to volatile
economic and political developments that a manager can’t control. Particularly in
some developing countries, just one or two companies can command the lion’s share
of an entire market capitalization, exposing investors to high doses of specific
business risk.

Canada, by comparison, boasts a mature stock market that resembles the U.S., but
its fortunes are still closely tied to the energy, natural-resources and
materials sectors. So it was in fact surprising when Lemieux’s Fidelity Canada
Fund (FICDX) showed up as a finalist in the search for a winning manager — the
only country fund to make the cut. His portfolio is diverse enough to compete in
the international-multicap-core category — and beat all but a handful of rivals.

To find our winner, MarketWatch asked fund researcher Lipper Inc. to hold
stock-fund managers to rigorous standards. Lipper screened diversified U.S.,
global and international funds with retail shareholders that ended 2007 in the
top 10% of their respective investment categories.

Funds scaling this hurdle then had to post three-year and five-year annualized
results through Dec. 31 in the top 25% of their peer groups. They also were
required to charge expenses below their category average and to provide
shareholders above-average tax efficiency.

We excluded team-managed funds, wanting to focus on solo operators. Finally,
managers had to have been piloting their portfolios for at least five years, to
reflect a full market cycle.

Seven up

Such a meticulous effort to highlight the best of the best fund managers sets the
bar high and so is bound to unearth only a few stalwarts. This year, almost 2,400
funds were screened according to the preset criteria. Only seven passed.

Selecting a winner from this group would have been simple if the sole measure
involved picking the best performer. Lemieux was the hands-down victor; Fidelity
Canada soared 35% last year.

But this annual accolade also rewards managers who deliver consistent longer-term
results. On that score, Lemieux had a strong challenger in Brent Lynn of Janus
Overseas Fund (JAOSX), an international-multicap-growth offering that invests not
only in Canada but across the developed and emerging world.

The final decision came down to the funds’ “Lipper Leaders” scorecard, which
ranks managers on a portfolio’s total return, consistent return, capital
preservation, tax efficiency and expenses relative to peers.

Fidelity Canada and Janus Overseas matched up with the highest rating for total
return and expenses. Lemieux pulled ahead by finishing in the top 2% of his
fund’s category in 2007 compared to Lynn’s 3%, but Lynn came back over a
three-year stretch, landing in the category’s top 3% versus the top 4% for
Lemieux.

The tie-breaker came down to consistent return, an assessment of results adjusted
for risk and volatility. Fidelity Canada edged Janus Overseas on that crucial
marker, and its five-year return in the highest 2% of its class scraped by a
top-3% finish for Overseas. That handed the award to Lemieux.

Click here to read about MarketWatch’s Mutual Fund Manager of the Year.

Northern light

Fidelity’s Maxime Lemieux is MarketWatch’s Mutual Fund Manager of the Year

By Jonathan Burton, MarketWatch

Last Update: 7:30 PM ET Jan 29, 2008

SAN FRANCISCO (MarketWatch) — Most Americans have no reason to sing “O Canada,”
the Canadian national anthem, but Maxime Lemieux is giving them one.

Lemieux, manager of Fidelity Canada Fund (FICDX), has put this country-specific
portfolio on the map with consistent, chart-topping results and careful attention
to risk. Moreover, he’s posted stellar returns without jumping headlong into the
hot energy and natural-resource sectors that have made Canada one of the world’s
best places to own stocks over the past few years.

Such independent thinking, aimed at providing shareholders with a smooth-running,
high-performing investment, is just one reason why Lemieux is the winner of
MarketWatch’s Mutual Fund Manager of the Year award for 2007.

Under Lemieux’s direction, Fidelity Canada has been a natural resource for its
investors. The fund’s shares rose 35% last year, trouncing its
international-multicap-core category average by almost 23 percentage points and
landing in the top 2% of its peers, according to fund researcher Lipper Inc. Main
contributors to this standout gain included Research In Motion Ltd.
(RIMM)(CA:RIM), maker of the BlackBerry handheld communications device,
fertilizer giant Potash Corp. of Saskatchewan (POT)(CA:POT) and T-shirt
manufacturer Gildan Activewear Inc. (GIL)(CA:GIL)

Fidelity Canada also lands in the highest 4% of its category over the past three
years, with an annualized gain of 25.7% versus 17.1% for the group. The fund’s
30.2% average five-year return, topping a 20.8% rise for its peers, bests all but
2% of rivals. A $10,000 investment in the Canadian portfolio at the end of 2002,
about two months after Lemieux took over, would have been worth more than $37,000
at the end of 2007.

“This has been a great fund over many time periods,” said Jeff Tjornehoj, a
Lipper senior research analyst. “This would be an interesting call for someone
who believes that Canada’s stock market is likely to outperform relative to the
U.S. Given the strength of the Canadian economy lately, it’s tough to argue
against that.”

Team Canada

Indeed, Canada’s robust economy, a surge of mergers and acquisitions and the
rapidly appreciating Canadian dollar all combined in recent years to give Lemieux
a strong tailwind. The fast track could easily have derailed a less-disciplined
manager, but he’s been reluctant to rely heavily on the oil and commodities
shares that command much of the Canadian market’s valuation and instead
diversified the portfolio across many industries.

“I’m not a momentum guy,” Lemieux said. “I like to protect my downside. I care
about risk. When things are bad, it can always get worse. I’m always cognizant of
that.”

Nowadays, in fact, Lemieux is more selective than ever. The housing and credit
crisis shaking the U.S. economy is also rattling Canada’s market. While Canadian
businesses are less exposed to fallout from the subprime loan mess than their
counterparts to the south, the fund manager says he’s concerned that a U.S.
slowdown could spread globally and crimp demand for goods marked “Made in
Canada.”

“I was cautious last year and I’m more cautious now,” Lemieux said. “Half the
market in Canada is natural resources; that’s something to be aware of. Even if
I’m underweight in these sectors, I may still get hurt.”

“My cash position is higher than before,” he added, pegging the fund’s liquidity
at between 5% and 10% of assets versus a reported 3.7% at the end of December.
“There’s been a big decline already since the peak. It’s going to take time to
enter a growth phase again.”

The $4.6 billion fund owned 90 stocks at the end of 2007, with about 39% of
assets invested in its 10 largest holdings. That’s a relatively concentrated
strategy, and since Lemieux doesn’t trade often — annual turnover is around 40%
– he’s got to have strong convictions about the stock research on which he bases
decisions. For that, he gets assistance from Fidelity’s dedicated group of 10
analysts who, like Lemieux, are based at the fund giant’s Boston headquarters.

“Most fund shops don’t have a ‘Team Canada,’” said Dan Lefkovitz, a mutual fund
analyst at investment researcher Morningstar Inc., who praises Lemieux for
branching into growth sectors other than energy that reflect a more complete
picture of Canada’s diverse economy.

“He’s developed some real stock-picking skills over the years,” Lefkovitz noted.

Lemieux, 34, joined Fidelity in Montreal in 1996 after graduating from McGill
University. Running a Fidelity fund is in fact a longstanding ambition for the
Quebec City native, who bought his first stock when he was 11 years old and later
absorbed the investing tips in “One Up on Wall Street,” the 1989 bestseller from
Peter Lynch, then the famed manager of Fidelity Magellan Fund (FMAGX).

“I like to find stories that have a secular trend — companies that will continue
to win market share and therefore continue to grow,” Lemieux said.

An emphasis on solid, long-term results also underscored MarketWatch’s rigorous
Mutual Fund Manager of the Year search. Lemieux beat out almost 2,400 U.S.,
global and international stock-fund managers who were judged on the performance,
expenses and tax efficiency of their portfolios. Click here to read about the
selection criteria.

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