Fidelity reopens a revamped Magellan Fund

After 10 years, Fidelity has re-opened its flagship fund Magellan (FMAGX) to new investors this month. The fund, made famous in the 1980s by manager Peter Lynch, had difficulty outperforming the market in the 1990s and was considered an “index-hugger” by many—in other words, the fund’s portfolio and performance was similar to that of the Standard and Poor’s 500 index. But you paid management fees of close to 1 percent a year for the privilege of owning Magellan, as opposed to 0.1 percent for Fidelity's Spartan 500 index fund. 

In a sense, Magellan became a victim of its own success. As its assets grew to over $70 billion, the fund had more money than its management could invest effectively. Today, at $42 billion, it has more room to maneuver.  And star fund manager Harry Lange, in just two years at the fund, has transformed Magellan into a lean large-cap growth fund with interesting characteristics—the top holdings include Google, Corning, and Nokia—and a handsome 19 percent return in 2007. It remains to be seen how it will perform in what will likely be an economic downturn in 2008, but it’s clear that Magellan is no longer vanilla. —Chris Horymski