While the nascent rebound of the past few weeks has many hoping that the worst is over for the market, we've still got a lot of loose financial ends to tie up. Institutions like Citigroup (NYSE:C) and AIG (NYSE:AIG) are still bloated with toxic assets; indicators of economic activity remain low; and just like the yodeling man on the Price is Right Cliffhanger game, unemployment figures show no sign of halting their upward climb.

Companies all over the world are taking measures to cut costs, maintain profit margins, and survive this global shake-up. And one big-name fund company is reacting by swinging the axe now and asking questions later.

Up and out
Fund giant Fidelity Investments has taken a new approach to dealing with portfolio managers that suffer through a period of bad performance -- by showing them the door. Last month, two struggling portfolio managers -- Patrick Venanzi of the Fidelity Mid-Cap Growth Fund (FSMGX) and Brent Bottamini of the Fidelity Latin America Fund (FLATX) -- were demoted to research analysts.

These two have not been the only victims at the fund shop. Richard Manuel, who headed up Fidelity Select Financial Services (FIDSX) and Fidelity Select Home Finance (FSVLX), has left Fidelity to "pursue other opportunities." Of course, the fact that those two funds lost 50% and 59% of their value, respectively, in 2008 may have been a motivating factor.

Elsewhere in the company's ranks, manager John Porter of Fidelity Advisor Growth Opportunities (FAGAX) and Robert Chow of Fidelity Equity-Income II (FEQTX) have both been pulled from their funds, which are both down roughly 50% over the past year. Fidelity has stated that they are working with both individuals to "identify other opportunities within the firm."

Boy, it looks sure looks like Fidelity has a hair trigger when it comes to their managers' underperformance. If you screw up, you're as good as gone!

Adding fuel to the fire
But if there's one overriding problem within Fidelity, it’s the high level of manager turnover. Putting their managers on such a short leash likely won't help to keep turnover down. At last count, of Fidelity's 269 mutual funds listed in Morningstar, only 54 have a manager that's been on board for more than five years. Most funds see a new leader come on board every couple of years or so.

Of course, there are a few rare exceptions to the rule -- top-notch funds with long-tenured managers and a terrific track record. One such gem is Fidelity Contrafund (FCNTX), run by Will Danoff for more than 18 years. Danoff's taste for fast-growing companies has found favor in names like Google (NASDAQ:GOOG), Berkshire Hathaway (NYSE:BRK-A), and Apple (NASDAQ:AAPL). Over the past 15 years, Contrafund has outranked 97% of its large-growth competitors.

Likewise, Fidelity Low-Priced Stock (FLPSX) has been under the careful hand of manager Joel Tillinghast for nearly two decades. In that time, Tillinghast has made a boatload of money investing in reasonably priced mid-sized stocks like Constellation Brands (NYSE:STZ) and Safeway (NYSE:SWY).

Fidelity should keep in mind that funds with longer-tenured managers tend to perform better than funds with fresh blood at the helm, just as these two funds exemplify. And even the two great managers in question here have encountered the occasional bad year from time to time.

A long-term lesson
Like us individual investors, Fidelity should be careful when it comes to making snap judgments based on short-term performance. Even great managers underperform from time to time, but if you're switching up talent every few years, you're focusing too heavily on the short term. While it’s understandable for funds to address the issue of underperformance before it drags on and angers shareholders, a constant merry-go-round of management isn't likely to make them comfortable, nor is it likely to foster what has actually been proven to produce great results: long-term manager tenure.

Consider that, according to data from Morningstar, the top 10 domestic stock fund managers have more than twice the tenure of the average domestic fund:


Manager Tenure

Average Domestic Stock Fund

5.0 Years

Domestic Top 10 Performers

10.6 Years

Data from Morningstar as of Jan. 6, 2009.

If you're interested in finding out which funds, Fidelity or otherwise, measure up to this long-term tenure criterion, the Fool's Champion Funds investment service has the answer. You can read all of our top recommendations with a free 30-day trial.

Amanda Kish heads up the Fool's Champion Funds newsletter service. At the time of publication, she did not own any of the companies or funds mentioned herein. Apple is a Stock Advisor recommendation. Google is a Rule Breakers selection. Click here to find out more about the Fool's disclosure policy.