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Why Is Magellan Still So Big?

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Fidelity today named a new manager for its Magellan fund (FMAGX). The one-time vehicle of legendary stock picker Peter Lynch, Magellan has floundered for more than a decade and faced massive redemptions: In 2000, the fund had nearly $110 billion in assets; it now has just $17 billion.

A better question to ask than why have so many investors fled is why have so many stayed.  It helps that $11 billion of the fund’s assets came from employer-sponsored retirement plans in 2009, according to the most recent data available from BrightScope, which tracks retirement plans. That was about half of the fund’s assets at the time.

Indeed, Magellan remains the fifth-biggest large growth equity fund used amongst 401(k) plans, according to BrightScope. And investors often have few options when it comes to choosing funds in their retirement plans, says Russel Kinnel, director of fund research at researcher Morningstar. “I don’t suppose a lot of people have been coming to the [Magellan] fund in the last couple of years on their own,” he says.

And many of those 401(k) participants — encouraged for years to set and forget the investments in their retirement portfolios — probably haven’t been keeping close track of Magellan’s individual performance since selecting it back in its glory years, says Gregg Fisher, chief investment officer of Gerstein Fisher, an investment advisory firm based in New York. “It’s possibly inertia that puts them in there,” he says. A Fidelity spokesman was not available for comment.

Of course, Magellan continues to bleed assets. Investors have yanked $33 billion from the fund since November 2005, when previous manager Harry Lange took over.

It’s now new manager Jeffrey Feingold’s challenge to stem the tide. Feingold, who joined Fidelity in 1997 as a stock analyst, has a good but short track record, says Kinnel. Over the past three years, his $1.1 billion Fidelity Trend fund (FTRNX) has posted a 5% annualized average return, placing it among the top 10% of large growth funds tracked by Morningstar. He will continue to manage the Trend fund, as well as the $162.8 million Fidelity Large Cap Growth fund (FSLGX), the $25.2 million Fidelity Advisor Strategic Growth fund (FTQTX) and the $13 million Fidelity VIP Growth Stock fund (FPVDC).


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