Not Danoff.
He has outperformed the S&P 500 over almost any conceivable time frame — one, three, five, 10, 20, 25 and even 34 years, according to Morningstar data. Since his arrival in September 1990, Contrafund has delivered a total return of 8,870 per cent, data compiled by Bloomberg show, more than double the S&P benchmark — and almost 3 percentage points better on an annualised basis. Its rocket fuel lately: big, potentially risky bets on Meta and Nvidia.
Year after year, Danoff has outperformed Wall Street. Credit: Bloomberg
All this raises the inevitable question: What does it mean for Fidelity if one day Danoff decides to stop? He has been running the fund since Germany was reunited and Madonna’s Vogue hit the charts. When he took over, there was no Alphabet, no Amazon.com, no Nvidia — along with Meta, another major Contrafund holding. Few Wall Street pros had even heard of the web.
Danoff’s famous mentor, Peter Lynch, reigned over the Fidelity Magellan Fund for a mere 13 years. On the other side of the country, Bill “Bond King” Gross lasted 26 years at the helm of Pacific Investment Management Co.’s Total Return Fund.
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Key-man risk
Robby Greengold, a Morningstar strategist, calls Danoff an exceptional stock-picker. At the same time, he said the sheer size of Contrafund magnifies the key-man risk associated with his extraordinary role at Fidelity.
The firm says it has a succession plan in place — just in case. He and other executives decline to discuss that plan publicly, beyond pointing to what they repeatedly characterise as a deep bench of managers who would be ready to step in.
Institutional investors, 401(k) plan providers and analysts have been encouraged to meet with several other portfolio managers, according to people familiar with the matter. Nidhi Gupta, a co-manager of one of Danoff’s smaller funds since 2020, and Matt Drukker, co-manager of a smaller version of Contrafund, are among those that analysts are watching.
“There are so many good people here,” Danoff said. “They attend the same meetings and know the same executives that I do.”
He goes on: “They are very capable and successful now, and they will do a great job when I eventually retire.”
Perhaps to prove the point, several veteran Fidelity fund managers joined Danoff during the phone interview. Among them: Jason Weiner, a co-manager at the top-performing $US11 billion Growth Fund; Steve Kaye, who manages north of $US50 billion in Fidelity’s Balanced and All Sector Equity funds; and long-time portfolio manager Joel Tillinghast.
Team player
Colleagues characterise Danoff as affable and a team player. But there’s no denying his name and track record carry a lot of weight inside and outside Fidelity. Between the Contrafund, related strategies and private investment mandates, he single-handedly manages roughly $US300 billion. That’s more money in one person’s hands than in the world’s biggest hedge fund, Bridgewater Associates, which manages about $US112 billion.
In all, Danoff is sitting on more than 3 per cent of Meta and about 1 per cent of AI darling Nvidia, according to data compiled by Bloomberg.
Danoff has been so successful that he has practically become a brand unto himself. Around Boston, he’s something of a local celebrity. In 2016, Fidelity released an advertisement showing a man typing a letter to him and enclosing a photograph of his son, saying he had invested in the Contrafund to save for the child’s college education. The tag line: “At Fidelity we don’t just manage money, we manage people’s money.”
Years later, Danoff’s colleagues tracked down the boy, by then grown. He’d graduated from college, had a son of his own and was still invested in Contrafund. Danoff said he keeps in touch with the family.
Danoff’s big bets on Nvidia and Meta have paid off. Credit: AP
Still, the Contrafund is hardly immune to the forces reshaping the mutual fund industry. Rising stock prices have lifted its assets under management from one high to the next. But customers keep taking chips off the table.
Clients have withdrawn money in 20 of the past 34 years — about $US90 billion in all — and the fund has recorded outflows in almost every month since May 2012, according to Morningstar data. Some of that cash has gone into other Fidelity strategies or could reflect redemptions from people who reached their investment goals and took profits.
Some analysts caution that Danoff’s recent performance has hinged on Meta and Nvidia, which together make up about 25 per cent of Contrafund’s assets. Winners like those can inflate returns on the way up — and crush them on the way down.
Danoff is unfazed.
“Why should we sell the big winners?” he said. After long years of success, some investors might be sympathetic if markets turn against him. During a rare bad year for Contrafund, a passerby spotted Danoff on the street near Fidelity’s headquarters.
“Keep going!” the person told him.
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For now, that’s precisely what Danoff plans to do. He also might work on his tennis game. About a decade ago, he partnered with Zuckerberg in a doubles round-robin.
They won.
Bloomberg
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