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There's Something About Harry
Fidelity's Magellan Fund is now leaner, meaner, and open for new business for the first time in more than 10 years.
The fund, which ballooned to become the biggest mutual fund in the world with $100 billion in assets at the end of last century, now has a more manageable $43 billion under management. It closed to new investors in 1997.
Investors have reason to celebrate. Its 2007 returns under manager Harry Lange were impressive: Magellan's total return was 18.8 percent, handily outperforming the S&P's 5.5 percent total return. And with an expense ratio of just 0.53 percent, Lange did far better for his investors than most hedge fund managers did for fees many times bigger.
Lange took over the troubled Magellan Fund in 2005, after investors lost their shirts thanks to former manager Bob Stanksy, who was criticized for missing growth opportunities after the tech bubble crashed.
A 20-year Fidelity veteran, Lange took the reins with a "go anywhere" investing approach--large or small cap, value or growth, domestic or international. The portfolio's top five holdings as of the end of November were Nokia, Corning, Google, Staples, and Canadian Natural Resources. During 2007, Lange was overweight technology and underweight financials, which paid off dearly.
Lange has maintained a relatively low public profile, which seems to have worked to his advantage in his returns. But it's possible that Fidelity waited too long to share its secret gem with the investing public at large. Even as Magellan was showing strong returns last year, the fund saw more money going out than just about every mutual fund in the universe.
According to Morningstar, it was one of the top 10 most redeemed funds as of the end of October. Investors took out $7 billion, or 16 percent of the fund's assets, even as the fund's returns climbed 17.6 percent.
But now the secret's out, and those investors likely regret their decision. Fidelity said Magellan will begin accepting money from new investors tomorrow.
by Megan Barnett
