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Fidelity newsletters spar
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August 24, 1999: 6:26 a.m. ET
Two independent publications battle in court over marketing claims
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - A nasty legal spat between two newsletters that track Fidelity Investments is shaking up the normally polite world of mutual funds.
The war of words between Eric Kobren of Fidelity Insight and Jim Lowell of Fidelity Investor has pitted two former colleagues against each other over claims that one maligned the other in promotional material.
The lawsuit by Kobren against Lowell underscores the increasing competition between independent newsletters, which are facing declining subscriptions in an era of online investing, industry experts say. There are a total of four newsletters that follow Fidelity funds, the nation's largest fund company.
"It is cause for some acrimony," said Bruce Sanford, attorney for Lowell. "What this lawsuit is about is Fidelity Insight being irked and afraid of a new competitor entering the marketplace."
Newsletter v. newsletter
The case dates back to January, when Kobren sued Lowell in U.S. District Court in Boston claiming Lowell made false and misleading comments about him. Lowell worked for Kobren before starting his own newsletter in July 1998.
Among other things, Lowell said in his own promotional material that he wasn't able to speak candidly about Fidelity funds while in Kobren's employ because of Kobren's "close ties and loyalties" to Fidelity, according to court documents.
Kobren declined to elaborate about the lawsuit, and would only say that the newsletter and his asset management firm are doing well. Efforts to reach his attorney, Allen Holland, were unsuccessful.
The suit names Lowell and the Maryland-based newsletter publisher, Phillips Publishing.
"Lowell was not precluded from criticizing any Fidelity funds, giving definite sell signals, or steering subscribers away from Fidelity's worst-performing funds and manages because of supposed 'close ties and loyalties' between Fidelity Insight and Fidelity Investments," the suit said.
In March, U.S. District Judge Robert Keeton denied a request for an injunction to stop publication of the promotional material. The judge wrote in part that Kobren "failed to show irreparable harm."
"Lowell's saying he was not permitted to provide readers 'completely honest and totally independent' advice is not shown to be false," Keeton wrote. "It is a legally permissable statement, whether analyzed as statement of fact or as a statement of opinion."
Meanwhile, a settlement conference is scheduled for Sept. 21. But Sanford is doubtful both sides can reach an agreement.
"I'm not optimistic at all," Sanford said. "There's no basis for a monetary settlement."
A crowded field
Donald Dion, editor of Fidelity Independent Advisor, thinks that Kobren is trying to eliminate competitors.
"Eric is a litigious individual," Dion said. "This is America and what he has got to realize is there's going to be competition."
Fidelity Insight is the largest of the newsletters tracking Fidelity funds, published since 1985.
But newsletters are under more pressure today because more investors are using the Internet for free financial information, Dion said. Many younger investors, for example, don't want to pay the $100 a year for a monthly newsletter.
"Competition is not going to go away," Dion said. "There are 15 million shareholders and there's plenty of business for everyone."
Fidelity Insight's recommended fund portfolios have average annualized returns between 1988 and 1998 of 13.1 percent, compared with 18.4 percent for the Wilshire 5000 index, said Mark Hulbert, editor of Hulbert Financial Digest. Hulbert ranks newsletters.
Fidelity Insight hasn't beaten the market in the last year or two, bringing the ranking "modestly lower," Hulbert said. But he said the downtick is nothing more than "statistical noise." Hulbert also pointed out that the newsletter's portfolios are 30 percent less risky than the market.
Hulbert also said he doubts the lawsuit will make much difference to newsletter readers. After all, he said, the readers are interested in advice.
"I'm looking at what (the newsletters) recommend and I assume investors are, too," Hulbert said. 
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