Will Danoff’s problem isn’t the performance of the giant Contrafund mutual fund that he manages at Fidelity Investments — that’s up 21% this year vs. the S&P 500’s 6.2% gain.

It’s the billions of dollars that are flowing out of the fund. “There’s a demographic issue,” he told Bloomberg News in an interview.

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

His view is representative of an entire industry’s worries as traditional mutual funds have been losing popularity for years. Some investors were irritated by chronically underperforming funds and others refused to pay commissions or annual fees that often approach 1%.

As a result, low-cost alternatives, such as index funds and exchange-traded funds that track the market instead of trying to outperform it, have more money than actively managed U.S. equity funds. In addition, younger investors have embraced sexier fintechs, namely Robinhood Markets, that allow them to make commission-free trades on their smartphones.

Not that closely held Fidelity has stood still as competition intensified. The asset management giant, managing ~$3.3T, has embraced ETFs, runs a discount brokerage, and developed expertise in crypto.

Danoff manages $230B of that amount and he has beaten the S&P 500 by an average of more than 3 percentage points annually over three decades.

Related tickers: FCNTX, FCNKX, FLCNX


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