The Wage of Innocence

It was any young, aspiring fund manager's dream. Early this month, mutual-fund giant Fidelity reached into obscurity and fingered Matthew Grech, 28, a semiconductor analyst, to run its faltering, $2 billion Select Electronics mutual fund. Bull-market madness? Perhaps. But if it is, Fidelity is not alone. With record amounts of capital flowing in ($30 billion just last month), mutual-fund firms are hunting for fresh talent in novel places--not quite kindergarten, but not very far removed from school.

The average manager's age still stands at a respectable 48, according to fund researcher Morningstar, but new technologies and new demand for investments have created a bull market for fund managers. And a deep resume isn't necessarily a requirement for the job. Grech, for instance, has been out of business school for two years, joining precocious stock pickers like his rising Fidelity colleague Erin Sullivan, also 28. While few shops actually give newbies a chance to run a fund as early as Fidelity, it's not too hard to find a fund at any firm that's watched over by some very innocent eyes--a trend that raises some skeptical industry eyebrows. "It's an interesting concept," cracks Jeffrey Molitor, principal at fund giant Vanguard, a Fidelity competitor, "giving somebody someone else's money to train with."

The young fund stars see their inexperience as (What else?) a virtue. Just ask John Potter, 29, a Wisconsin native who's been playing the market since 10th grade and has generated an 18% return in the past year at the $175 million Marshall Mid-Cap Value Fund. "We don't have any preconceived notions or emotional baggage," he says. "I know I'm not playing with paper money."

In fact, a study by economists Judith Chevalier and Glenn Ellison, to be published later this year in the Journal of Finance, argues that young fund managers are usually more averse to risk taking and actually outperform their older counterparts by a small margin. Case in point: Blaine Rollins, 31, a University of Colorado graduate who, when he's not playing laser tag or going to an Aerosmith concert, oversees a combined $670 million in assets at the Janus Balanced Fund and Janus Equity Income Fund. "There's always some executive who views you as a snot-nosed kid," says Rollins. "But if you've done your homework, you can talk on his level." And make him money; in the past year, Rollins has garnered a strong 24% to 31% return for his funds.

Another Young Turk, Christine Baxter, 29, thinks her age helps her relate to young tech entrepreneurs she tracks as manager of the $1.2 billion PBHG Emerging Growth Fund. "This is an incredibly taxing business [that requires so much] energy," says Baxter, a philosophy major who has averaged a 20% return since 1995. Says Kurt Brower, author of Mutual Fund Mastery: "It's like surgeons--eventually they have to operate." Investors can only hope that if things go bad, these green managers can stop the bleeding.

--By Daniel Eisenberg