KOBREN BUILDS KINGDOM ON FIDELITY FOUNDATIONS: HE KEEPS A CLOSE EYE ON NO. 1, SOME SAY TOO CLOSE

From publishing newsletters to managing money for wealthy clients, Eric M. Kobren seems to have the Midas touch.

His status as the reigning monarch of Fidelity watchers and flair for self-promotion have translated into a $900 million financial services empire that includes two newsletters – Fidelity Insight and Funds Net Insight – a family of mutual funds and a money management business. His Insight Group in Wellesley, Mass., had revenues of more than $20 million last year, he says.

“Eric is an extremely savvy marketer,” says Jack Bowers, editor of the competing Fidelity Monitor. “He’s plowed the big bucks into promoting his business and it has certainly paid off.”

Attests another competitor, Fidelity Investor editor Jim Lowell, “Eric lives in a house four times the size of mine -not to mention the house he just built in Florida and his three Porsches.”

Mr. Kobren, for his part, insists he didn’t build a home in Florida (although he does have one there) and declined to comment on the Porsches.

Gotta be tough

One thing is clear: the world of newsletter publishing is not for the thin-skinned.

When Mr. Kobren launched Fidelity Insight in 1985, it was the first newsletter to focus on Fidelity funds. Today, there are at least three others, all of which Mr. Kobren dismisses as “copycats.” He refuses to reveal how many subscribers Fidelity Insight has, saying only that the two monthly newsletters, which cost $177 a year each, have 115,000 subscribers.

The 45-year-old former Fidelity marketing executive says he has a “love-hate” relationship with his onetime employer. He makes a point of boasting about his access to the firm and such top managers as Fidelity Fund’s Beth Terrana and Value Fund’s Rich Fentin.

That’s not to say he doesn’t have some bragging rights: When the world’s largest mutual fund firm hosted a 1997 breakfast to mark Robert Stansky’s first anniversary at the helm of the flagship Magellan Fund, Mr. Kobren was seated at the manager’s right hand.

Fidelity Investments maintains that Mr. Kobren enjoys the same level of access to executives and managers as other journalists. “We treat all journalists the same,” says a spokeswoman for the Boston firm. “We try to facilitate as many interviews as we can.”

But Mr. Kobren’s association is a little cozier than that. First, there aren’t many journalists with custody of $750 million in privately managed assets at Fidelity.

Nor are there many willing to appear in a national ad campaign endorsing the firm. Fidelity began using Mr. Kobren in some of its ads last year and is getting ready to unveil another Kobren testimonial.

“Being one of their larger investment adviser clients, and having the

name that I do, I guess they felt it would be beneficial to point out that I use their services,” says Mr. Kobren, whom one critic went so far as to call a mouthpiece for Fidelity. “But I don’t receive any compensation for those ads.”

That’s not to say the Fidelity-Kobren union has been all smooth sailing. When Mr. Kobren recommended Fidelity’s Small Cap Selector Fund to his readers in the early 1990s, the fledgling fund was flooded with $470 million – creating havoc for manager Brad Lewis. “It actually caused some friction between Brad and myself,” he says. “We were caught unprepared.”

Today, Mr. Kobren – along with other Fidelity newsletter writers – makes it a point to alert fund managers when he’s about to come out with something that may have a big effect on fund flows.

Mr. Kobren’s boasting doesn’t end with Fidelity. “I don’t think there are more than two or three fund managers who refuse to take my calls immediately,” says the trim, square-jawed executive, who started college at age 16 and received an MBA from Columbia University at 22. “I have a pretty good reputation.”

But, alas, his Midas touch may be fading. After more than a decade of enviable growth, Kobren Insight Group is showing signs of strain, both in terms of performance and dwindling assets.

As recently as last month, Mr. Kobren pegged the firm’s assets at $1 billion, with $850 million in privately managed accounts and the rest in mutual funds. Last week, however, the firm’s website touted assets of “approximately $900 million,” with $750 million in privately managed accounts.

“Those figures change from month to month,” says Mr. Kobren, who concedes that managing money for private clients is a “much more competitive business than it was a few years ago.”

rivals snatching crown

The firm’s investment performance is also lagging. For the 12 months ended Feb. 28, Fidelity Insight ranked 94th of 141 investment newsletters with an average model portfolio loss of 2.2%, according to Hulbert Financial Digest, an Alexandria, Va., publication that ranks the performance of investment newsletters.

By comparison, rival Fidelity Independent Adviser ranked 41st with an average gain of 8.7% and Fidelity Monitor 53rd with an average gain of 5.5%. Fidelity Investor, which was started in 1997, is not yet ranked.

“I don’t worry about Eric as much as I do about my other competitors,” snipes Mr. Lowell, who used to work for Mr. Kobren as editor of FundsNet Insight, which covers both Fidelity and non-Fidelity funds.

The pain doesn’t end there. Two of Mr. Kobren’s three funds-of-funds are laggards. His Growth Fund, for example, posted a 6.93% gain for the 12 months ended March 31, vs. 12.16% for its peers. Kobren Conservative Allocation lost 1.97% during the same period, compared with an average 5.21% gain for its peers.

The only peer beater is the Moderate Growth Fund, which posted a loss of 3.54%, compared with its peer group’s average loss of 9.79%, according to Morningstar Inc., the Chicago fund tracker.

Mr. Kobren is disappointed. “It’s something that every investment firm goes through,” he says. “As we have increased the number of people involved in the decision-making process, we have watered down and hindered the process.”

To turn things around, he is streamlining the process, he says, so that the ultimate investment decisions will be made by himself alone.

“I was responsible for the decision-making up until 1994 and I can tell you that my performance was better,” he says. “Was that luck?”

This month, Mr. Kobren added an aggressive growth model, heavily weighted in large-capitalization stocks, to Fidelity Insight. It should improve the newsletter’s overall investment results – assuming, of course, that large-cap stocks remain in favor.

new fund of stocks

Mr. Kobren has also enlisted the help of longtime buddy and famed value manager Scott Black of Boston’s Delphi Management to subadvise a new mutual fund, the Kobren Delphi Value Fund. Launched in December, it differs from the other Kobren funds in that it invests in individual securities instead of in mutual funds.

“Scott has phenomenal numbers,” says Mr. Kobren of the man who served as best man at his 1980 wedding. “This is a way of using some of his talents for my clients.”

Despite his recent problems, Mr. Kobren is highly regarded – especially among fund managers.

“If Eric calls, I don’t worry about getting hit by some ridiculous question,” says Christopher Browne, a partner at asset management firm Tweedy Browne & Co. in New York. “He really understands the process.”

For his part, Mr. Kobren hopes the changes he’s made will boost results.

“I find myself spending a lot less time thinking about where the company should be positioned strategically and coming out with new products,” he says. “My focus is seeing if we can increase our returns.”