‘We need to appeal to the Gen Z-ers’: A Fidelity fund manager overseeing $230 billion explains how his firm is responding to the Robinhood revolution — and laments selling out of Tesla

• Will Danoff, manager of the $230 billion Fidelity Contrafund, told Bloomberg that there’s a “demographic issue” for mutual funds: Gen Z is not very interested in owning them. 
• “We need to appeal to the Gen Z-ers and the younger generation as well,” Danoff said.
• Danoff also lamented selling a large portion of the fund’s Tesla stake.
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Will Danoff has managed the Fidelity Contrafund for over 30 years, but he hasn’t seen anything like the “demographic issue” facing mutual funds right now, he told Bloomberg in a recent interview.

He was referring to the rise of day-trading activity from young market participants, which has thrown many traditional money managers for a loop.

“We need to appeal to the Gen Z-ers and the younger generation as well, and luckily I think our app is quite good,” Danoff said. “But you know, a typical Gen Z-er may not be as interested in owning a mutual fund.”

Danoff’s mutual fund has beaten the S&P 500 benchmark by an average of more than three percentage points annually for the last 30 years, according to Bloomberg. But he said outperforming the market is “much more competitive now,” given the thousands of investment options available.

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“When I started in 1990 there were 260 equity funds, now there are thousands,” he said. “There are thousands of hedge funds. There are millions of robinhood investors.” 

In terms of what the Fidelity Contrafund is looking to invest in now, Danoff said it’s looking more closely at companies that have a strong environmental, social, and governance (ESG) component.

“Companies that I’m invested in care deeply about our country,” he said. “They care deeply about the environment and they realize making all stakeholders happy is good for business.” 

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Danoff also said the fund is heavily invested in work-from-home beneficiaries, while he has not made a large bet on industries that have been hit hardest by the pandemic like airlines and hotels.  

With regards to Tesla, he said that the Contrafund sold a large portion of its stake in 2017 and 2018 amid short-term profitability concerns. Danoff now laments the divestiture.

“Elon Musk is a remarkable executive, he’s a super smart man, and I should not have cut back,” he said, predicting that in 10 years from now all new cars may be electric vehicles or hybrids.

He concluded: “At some point hopefully I’ll be able to buy back the stock. I own a very small position now but I wish I owned more.”

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