BOSTON (Reuters) - Juul Labs Inc has become one the biggest bets in the portfolio of Fidelity’s $28 billion Blue Chip Growth Fund, whose exposure to the troubled e-cigarette maker has climbed to $761 million amid a regulatory backlash and departure of its top executive.

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Fidelity Blue Chip Growth Fund's FBGKX.O manager Sonu Kalra had 2.7% of the giant fund's assets invested in Juul as of July 31, the latest fund disclosures show, up from 1.7% of assets a year earlier.

Although Juul remains privately held, some Fidelity funds have made a practice of taking stakes in pre-IPO companies that have paid off big when they go public.

But the tactic can also put Fidelity fund holders into volatile situations like the one at rideshare leader Uber Technologies Inc UBER.N, which is trading well below its IPO price in May.

Juul is the latest example of pre-IPO drama. On Wednesday the company's CEO stepped down as merger talks between its biggest investor Altria Group Inc MO.N and Philip Morris International Inc PM.N collapsed in the face of a regulatory backlash against vaping.

Products made by Juul and others vaporize liquid containing nicotine. While they can help people quit smoking, the company faces a U.S. ban on some products and concerns about illnesses linked to vaping.

Flavored e-cigarettes represent 80% of Juul’s sales. The U.S. Food and Drug Administration’s plan to pull all e-cig flavors from the market, along with bans in some markets already, have pushed Juul’s valuation down to about $25 billion, from $38 billion when Altria invested in it, according to Morgan Stanley.

A spokesman for Boston-based Fidelity declined to comment. Fidelity’s Kalra acknowledged scrutiny of Juul from regulators but wrote that “Juul’s success in penetrating the U.S. market and continuing to grow its sales and earnings supported a higher valuation for this position,” according to a note to investors dated July 31.

Juul was in the Fidelity's fund top 10 holdings at the end of July, sandwiched between Visa Inc V.N and Salesforce.com Inc CRM.N.

John Bonnanzio, an editor of independent newsletter Fidelity Monitor & Insight, said the Juul stake has become risky but managers may be tempted by the chance to deliver outsize returns to help beat their benchmark and rival index funds.

Some managers have decided, “You can’t beat the index without investing outside of it,” Bonnanzio said.

Blue Chip Growth’s three-year average annual return of 17.1% is better than 79% of peer large cap growth funds, according to Morningstar Inc.