January 14, 2008

Magellan Fund Reopens to New Investors

Retirement withdrawals have shrunk assets to $44 billion

Advisors will be able to buy Fidelity's Magellan fund for new investors for the first time since September 30, 1997, Fidelity Investments announced on January 14. Because of redemptions by investors who had invested in Magellan for their retirement accounts, and are now poised to take distributions, the fund now has room to grow.

"Having been closed for more than a decade, Magellan's shareholder base has matured and, in the normal course of investing, many shareholders have continued to redeem assets as they've met their financial goals. In fact, 85% of the fund's assets are earmarked for retirement, and the Baby Boomer generation has now begun to retire and tap those dollars," explains Walter Donovan, president, Equity Division, Fidelity Management & Research Company, in the announcement.

With $44.8 billion in assets, the storied fund is not new to reopening to new investors: it was closed once before, from 1965 to 1981. From its inception date of May 2, 1963, when it was managed by Edward Johnson, III, who is now Fidelity's CEO and chairman, through December 31, 2007, the fund has had a remarkable average annual total return of 18.4%. Managed since October 31, 2005 by Harry Lange, the fund has had seven portfolio managers. Probably the most famous portfolio manager of Magellan--and the one with the longest tenure--is Peter Lynch, who managed the fund for 13 years, from May 31, 1977 until May 31, 1990.

In addition to market opportunity, "Magellan's investment opportunity set has become broader and deeper, in line with global market trends," the announcement said. Fidelity has more than doubled the number of research analysts for equities and has revamped and added to analyst career tracks, and has been recruiting experienced analysts as well as business school graduates, according to the announcement.

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