Oh, how the mighty have fallen. Fidelity Magellan (MUTF:FMAGX) once was the world’s largest mutual fund, topping out at $110 billion in assets in 2000. After delivering subpar returns during the past 15 years, however, Magellan now ranks as only the ninth largest fund at Fidelity, with $17 billion in assets.
In Magellan’s heyday, photos of former star manager Peter Lynch graced the covers of personal finance magazines. Investors jammed Fidelity’s phone lines, eager to buy shares of what some called “that Fah-gellity fund.” Since Lynch’s retirement in 1990 at the ripe old age of 46, his successors have tried (but largely failed) to match Lynch’s results.
Given the mutual fund’s particularly disappointing results during the past decade — its average annual return of 0.54% trails the S&P 500’s 2.70% through the end of August) — Fidelity’s announcement last month that Jeffrey Feingold would be replacing Harry Lange as manager came as no great surprise.
Lange, who previously had enjoyed success as manager of Fidelity Capital Appreciation (MUTF:FDCAX), struggled at Magellan. Since taking the reins in October 2005, Magellan’s total return of -0.1% trailed the 14.1% gain in the S&P 500 (through Aug. 31). The mutual fund’s performance lagged 85% of its peers during the past five years, and assets shrank by $33 billion during Lange’s tenure.
Lange’s penchant for a more global approach to asset allocation did not help matters during the protracted downturn in established foreign markets over the past several years. Meanwhile, the fund never benefited from any meaningful exposure to emerging-markets stocks, which performed much better. An ill-timed decision to load up on financial stocks, including Wachovia and AIG (NYSE:AIG), led to a bruising loss of 49% in 2008.
At the end of last year, I speculated that Lange likely would be out of a job if the established foreign markets did not turn around soon. This year’s 18.7% decline (through Oct. 3) in the iShares MSCI EAFE Index Fund (NYSE:EFA) of developed international markets sealed Lange’s fate.
Fidelity now turns to Jeffrey Feingold to help restore some of Magellan’s lost luster. Feingold has achieved solid results as manager of the $1.04 billion portfolio at Fidelity Trend (MUTF:FTRNX), which he has managed since February 2007. He also has managed Fidelity Large Cap Growth (MUTF:FSLGX) since November 2009 and will continue to manage Advisor Strategic Growth and VIP Growth Stock Portfolio. Previously, Feingold managed several of Fidelity’s sector portfolios. He is a 1992 graduate of Brown University and earned his MBA at Harvard in 1997.