This fall, Boston-based fund giant Fidelity plans to celebrate the 25-year tenure of William Danoff, head of the biggest fund run by a single manager in the U.S. and arguably the best-performing large-cap manager of his time.
At a time when investors have been shifting tens of billions of dollars from active management to passively-managed funds, Danoff is one of the few mutual fund managers whose quarterly disclosures can move market prices. His Contrafund, with $106.3 billion in assets under management, is a mainstay of retirement savings plans nationwide.
Yet some financial advisors and fund analysts say they are concerned that Fidelity has yet to name a co-manager for Contrafund, setting up the risk that investors will flee and remaining shareholders will suffer should Danoff, 55, retire or otherwise leave the fund suddenly.
"There is a key man risk with Contrafund," said Katie Rushkewicz Reichart, an analyst at Morningstar who covers the fund. "Not only has Danoff done quite well but he's managing such a large sum of money that it's not a role that another person could easily step into."
Those concerns are an echo of last September, when Bill Gross, who often referred to himself as the king of bonds, abruptly left Pimco and his management of the Total Return fund. To be sure, Gross had his worst performance in nearly two decades in the year before he left Pimco, and the fund had seen 16 straight months of outflows leading up to his departure. After his departure, Total Return suffered $18 billion in outflows in the first month alone, and another $107 billion between October 2014 and August 2015, according to Lipper data.
Should Danoff leave, a sizable rush to redeem shares could force Contrafund to unload some of its positions in companies such as Facebook, Apple, and Walt Disney in which it is one of the largest shareholders, analysts said.
Retirement plans, meanwhile, may be forced to remove the fund from among its investment options because the fund would no longer have the same management team in place for at least three years.
Most advisors and institutional investors require at least a three-year track record with current management before investing, and the slate is wiped clean if the principal manager leaves without having three years or more with a co-manager, said Todd Rosenbluth, director of mutual fund research at S&P Capital IQ.
Fidelity did not make Danoff available for this article, but said concerns about succession planning are overblown.
"Will is not going anywhere," said Brian Hogan, the head of Fidelity's equity division. "I can say that with a lot of confidence. I talk to Will almost every day in person, on phone, or email. He's tremendously engaged and he's the investment leader, a real workhorse in the department."