Magellan Fund
Encyclopedia
The Fidelity Magellan Fund is a US-domiciled mutual fund
from the Fidelity
family of funds. It is perhaps the world’s best known actively managed
mutual fund. On January 14, 2008, Fidelity announced that the fund would be re-opened to new investors for the first time in over a decade.
Although most people believe that Peter Lynch is the cornerstone of Magellan’s performance, and ultimately the growth in assets invested in the fund, the best annual return the fund ever had was in 1968 when it returned 116.08%. In fact, the best three year record the fund had happened before Peter Lynch
was at the helm when it returned 68.32% between 1965 and 1967. Peter Lynch took the reins in May 1977 and remained the manager of Magellan for the subsequent thirteen years. Between 1977 and 1990 the fund averaged a 29% annual return. He created the investment process commonly referred to as “Buy What You Know”.
Morris Smith replaced Lynch the manager of Magellan. During the two years he was there he managed to beat the S&P 500 by 7%. He decided to leave investing entirely after his experience at Magellan and has spent time pursuing religious activities. Jeffrey Vinik spent four years managing Magellan and during that time he produced an 83.70% cumulative return and outperformed the cumulative S&P500 return by 5.91%. Vinik is most often remembered as the manager who moved a high percentage of the portfolio out of technology stocks and into bonds at the wrong time, causing Magellan to underperform its peers for the first time in the fund’s history. However, others argue that Vinik merely moved into bonds early. Vinik moved Magellan into bonds in the fall of 1995. In the seven years ending in March 2003, on a total return basis, 10-year Treasuries returned 78 percent, AAA corporate bonds returned 46 percent, and, with dividends reinvested, the S&P 500 returned 31 percent. In addition, Vinik's strategy would have avoided the dot-com bust.
Robert ‘Bob’ Stansky is a direct disciple of Peter Lynch’s having worked as his research assistant from 1984 to 1987. During his time at Magellan Stansky managed to return 238% for the fund. However, the S&P 500 index returned 274% during the same period. This marked the only regime where Magellan underperformed the market. Magellan’s portfolio closely resembled the S&P 500 during Stansky’s tenure--so much so that Stansky himself helped coined the phrase ‘closet indexer’. Harry W. Lange
represented a change for the Magellan fund. His approach was known as a 'go everywhere approach'. This means he was just as likely to buy small cap stocks as he was large cap stocks, value as he was growth, US companies as he was international.
By the end of the century the Fidelity Magellan Fund had well over $100 billion in assets under management. For quite some time it was the single largest mutual fund in the world. In April 2000, Vanguard’s S&P 500 index fund displaced Magellan as the largest mutual fund in the world. By the time Stansky retired in 2005 the assets under management for Magellan were back down to $52.5 billion. Harry Lange took over Magellan and promptly changed the portfolio to reflect his view on the market. Today about 25 per cent of Magellan is invested in companies based outside the US. In May, 2006 Magellan made a capital gains distribution to shareholders of $22.11 representing roughly 18% of assets. As of 12/31/08 the total AUM for the Magellan Fund stands at $19 billion. Lange has said that he believes Magellan can handle more assets. After being closed for over a decade, on January 14, 2008, Fidelity announced that the fund would be re-opened to new investors .
On September 13, 2011, Fidelity named Jeffrey S. Feingold, manager of Fidelity Trend Fund, as the next manager of Fidelity Magellan Fund . Harry Lange presided over the largest drop in assets under management, as a percentage, as well as in absolute dollars, of Magellan.
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
from the Fidelity
Fidelity Investments
FMR LLC or Fidelity Investments is an American multinational financial services corporation one of the largest mutual fund and financial services groups in the world. It was founded in 1946 and serves North American investors. Fidelity Ventures is its venture capital arm...
family of funds. It is perhaps the world’s best known actively managed
Active management
Active management refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index...
mutual fund. On January 14, 2008, Fidelity announced that the fund would be re-opened to new investors for the first time in over a decade.
Managers
| Portfolio Manager | Tenure | AUM Assets under management Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition... When Leaving |
|---|---|---|
| Edward Johnson, III Edward Johnson, III Edward Crosby "Ned" Johnson 3rd is an American investor and businessman who, along with daughter Abigail Johnson, owns and runs Fidelity Investments and Fidelity International... |
1963 to 1977 | $20 million |
| Peter Lynch Peter Lynch Peter Lynch is a Wall Street stock investor. He is currently a research consultant at Fidelity Investments. Lynch graduated from Boston College in 1965 and earned a Master of Business Administration from the Wharton School of the University of Pennsylvania in 1968.-Fidelity:Lynch was hired as an... |
5/1977 to 5/1990 | $13 billion |
| Morris J. Smith | 5/1990 to 7/1992 | $20 billion |
| Jeffrey N. Vinik Jeffrey Vinik Jeffrey N. Vinik is the current owner of the Tampa Bay Lightning and the Tampa Bay Storm , as well as a minority owner of the Boston Red Sox... |
7/1992 to 6/1996 | $50 billion |
| Robert E. Stansky | 6/1996 to 10/2005 | $52.5 billion |
| Harry W. Lange Harry W. Lange Harry W. Lange is a Boston-based investment manager. He was, until recently , the portfolio manager for the Magellan Fund and is a Vice President at Fidelity Investments.-Investment Experience:... |
10/2005 to 9/2011 | $14.7 billion |
| Jeffrey S. Feingold | 9/2011 to present | Not applicable |
Fund performance
| Period | Total Return | S&P 500 Return |
|---|---|---|
| 2010 | 12.4% | 14.9% |
| 2009 | 41.1% | 26.5% |
| 2008 | (49.66%) | (38.91%) |
| 2007 | 18.84% | 3.53% |
| 2006 | 7.22% | 15.79% |
| 2005 | 6.42% | 4.91% |
| 2004 | 7.49% | 10.88% |
| 2003 | 24.82% | 26.68% |
| 2002 | (23.66%) | (22.10%) |
| 2001 | (11.65%) | (11.89%) |
| 2000 | (9.29%) | (9.11%) |
| 1999 | 24.05% | 21.04% |
| 1998 | 33.63% | 28.58% |
| 1997 | 26.59% | 33.36% |
| 1996 | 11.69% | 22.96% |
| 1995 | 36.82% | 37.58% |
| 1994 | (1.81%) | 1.32% |
| 1993 | 24.66% | 10.08% |
| 1992 | 7.01% | 7.62% |
| 1991 | 41.03% | 30.47% |
| 1990 | (4.51%) | (3.10%) |
Although most people believe that Peter Lynch is the cornerstone of Magellan’s performance, and ultimately the growth in assets invested in the fund, the best annual return the fund ever had was in 1968 when it returned 116.08%. In fact, the best three year record the fund had happened before Peter Lynch
Peter Lynch
Peter Lynch is a Wall Street stock investor. He is currently a research consultant at Fidelity Investments. Lynch graduated from Boston College in 1965 and earned a Master of Business Administration from the Wharton School of the University of Pennsylvania in 1968.-Fidelity:Lynch was hired as an...
was at the helm when it returned 68.32% between 1965 and 1967. Peter Lynch took the reins in May 1977 and remained the manager of Magellan for the subsequent thirteen years. Between 1977 and 1990 the fund averaged a 29% annual return. He created the investment process commonly referred to as “Buy What You Know”.
Morris Smith replaced Lynch the manager of Magellan. During the two years he was there he managed to beat the S&P 500 by 7%. He decided to leave investing entirely after his experience at Magellan and has spent time pursuing religious activities. Jeffrey Vinik spent four years managing Magellan and during that time he produced an 83.70% cumulative return and outperformed the cumulative S&P500 return by 5.91%. Vinik is most often remembered as the manager who moved a high percentage of the portfolio out of technology stocks and into bonds at the wrong time, causing Magellan to underperform its peers for the first time in the fund’s history. However, others argue that Vinik merely moved into bonds early. Vinik moved Magellan into bonds in the fall of 1995. In the seven years ending in March 2003, on a total return basis, 10-year Treasuries returned 78 percent, AAA corporate bonds returned 46 percent, and, with dividends reinvested, the S&P 500 returned 31 percent. In addition, Vinik's strategy would have avoided the dot-com bust.
Robert ‘Bob’ Stansky is a direct disciple of Peter Lynch’s having worked as his research assistant from 1984 to 1987. During his time at Magellan Stansky managed to return 238% for the fund. However, the S&P 500 index returned 274% during the same period. This marked the only regime where Magellan underperformed the market. Magellan’s portfolio closely resembled the S&P 500 during Stansky’s tenure--so much so that Stansky himself helped coined the phrase ‘closet indexer’. Harry W. Lange
Harry W. Lange
Harry W. Lange is a Boston-based investment manager. He was, until recently , the portfolio manager for the Magellan Fund and is a Vice President at Fidelity Investments.-Investment Experience:...
represented a change for the Magellan fund. His approach was known as a 'go everywhere approach'. This means he was just as likely to buy small cap stocks as he was large cap stocks, value as he was growth, US companies as he was international.
Assets under management
Fidelity earns its income, like most mutual funds, from fees charged on its assets under management. From the fund’s inception in 1963 through 1977 Magellan grew to $20 million in AUM. The $20 million fund Peter Lynch inherited grew to $13 billion in AUM during his tenure. During Morris Smith's tenure, AUM grew from $13 billion to $20 billion. During Jeffrey Vinik's it grew to $50 billion. Bob Stansky certainly experienced the most volatility with respect to AUM during his time with Magellan. In July 1996, his first month as manager, more than $3.5 billion was taken out of the fund as investors redeemed their shares and the portfolio experienced setbacks. Stansky quickly moved out of bonds and into stocks to stop the assets from flowing out. On September 30, 1997 Fidelity decided to close the Magellan Fund to new investors. They believed that the size of the fund was beginning to make it difficult to beat the market.By the end of the century the Fidelity Magellan Fund had well over $100 billion in assets under management. For quite some time it was the single largest mutual fund in the world. In April 2000, Vanguard’s S&P 500 index fund displaced Magellan as the largest mutual fund in the world. By the time Stansky retired in 2005 the assets under management for Magellan were back down to $52.5 billion. Harry Lange took over Magellan and promptly changed the portfolio to reflect his view on the market. Today about 25 per cent of Magellan is invested in companies based outside the US. In May, 2006 Magellan made a capital gains distribution to shareholders of $22.11 representing roughly 18% of assets. As of 12/31/08 the total AUM for the Magellan Fund stands at $19 billion. Lange has said that he believes Magellan can handle more assets. After being closed for over a decade, on January 14, 2008, Fidelity announced that the fund would be re-opened to new investors .
On September 13, 2011, Fidelity named Jeffrey S. Feingold, manager of Fidelity Trend Fund, as the next manager of Fidelity Magellan Fund . Harry Lange presided over the largest drop in assets under management, as a percentage, as well as in absolute dollars, of Magellan.