Having lost some business, the best-known club in the mutual-fund industry is swapping its "members only" sign for a welcome mat. Fidelity Investments' recent decision...
NEW YORK — Having lost some business, the best-known club in the mutual-fund industry is swapping its “members only” sign for a welcome mat.
Fidelity Investments’ recent decision to allow investors entry to its storied Magellan Fund for the first time in a decade offers a promising opportunity for those who missed out on its quiet success in recent years.
But while fund openings can portend a coming run-up in performance, investors shouldn’t buy into Magellan with an expectation that it is poised to take off.
A look past the well-known nameplate reveals a smart fund but one that, like any other investment, isn’t without risk and that should be just part of an overall investment plan.
Most Read Business Stories
- The penthouse atop Smith Tower is on the rental market for the first time
- Downtowns will be back, but Seattle has choices to make
- Boutique cruise line Windstar will move its Seattle headquarters to Miami
- Zillow’s price estimates are now cash offers in homebuying push
- US advisers endorse single-shot COVID-19 vaccine from J&J
The reopening of Magellan comes as aging investors have been tapping into savings and causing the fund’s assets to dwindle. It’s still a titan at $45 billion, but well off the unwieldy $105 billion in as at its peak in the late 1990s.
The weight-conscious Magellan still has critics who complain the fund is off its prime.
From 1977 until 1990, when Peter Lynch made his name running Magellan, it averaged annual returns of 29 percent a year.
Last year was Magellan’s best performance since 2003, posting a nearly 19 percent return, compared with 5.5 percent for the Standard & Poor’s 500 index.
Analysts give praise to Harry Lange, who took over as portfolio manager in 2005.
In the past 10 years, Magellan has shown returns that outpaced those of the S&P 500 by only about a quarter percentage point per year.
“Perception lags reality. I think the general perception seems to be that this is a once-great fund that has fallen from glory,” said Dan Lefkovitz, lead Fidelity analyst at Morningstar. “I actually think it is a pretty good fund in its current form.”
Still, he sees solid performances by other large-capitalization funds as well, so he doesn’t suggest investors necessarily rush into Magellan.
“Fund reopenings can be interesting opportunities. They often happen when a manager is finding a lot to buy,” Lefkovitz said.
“This is just a fund that has been in redemption mode for years and years and has been steadily bleeding assets,” he said. “I just hope that Fidelity is much more vigilant about monitoring asset growth.”