Fidelity Investments named Jeffrey S. Feingold to run the $17.4 billion Magellan Fund, replacing
Harry Lange who oversaw a two-thirds decline in assets in what
was once the largest U.S. mutual fund.
Magellan trailed 85 percent of rival funds over the past
five years and shrank in size by $33 billion during Lange’s
almost six-year tenure, according to data compiled by Bloomberg.
Feingold, 40, manages the $1.04 billion Fidelity Trend Fund,
which beat 84 percent of competing funds over the past year.
“His performance was deeply disappointing,” John Bonnanzio, editor of Fidelity Insight, a newsletter based in
Wellesley,
Massachusetts, said today of Lange. Bonnanzio said he
was optimistic about the change in management, adding that
Feingold “has a good record.”
Feingold, who graduated from
Brown University in
Providence,
Rhode Island, and holds a master’s degree from
Harvard University in Cambridge, Massachusetts, joined Fidelity
as an equity analyst in 1997.
Lange, 59, a 24-year veteran with the firm, will stay at
Fidelity and is exploring other opportunities within the
company,
Vincent Loporchio, a spokesman for Boston-based
Fidelity, which manages $1.6 trillion, said today in a telephone
interview.
“The fund has generally underperformed its benchmark and,
that said, we’re confident Jeff Feingold can bring Magellan the
opportunity to provide competitive long-term performance,”
Loporchio said.
Financial Stocks
Magellan, originally managed by Ned Johnson, Fidelity’s
chairman and chief executive officer, rose to prominence under
Peter Lynch in the 1980s. Lynch guided the fund to gains of 29
percent a year from 1977 to 1990, compared with 15 percent
annual returns for the Standard & Poor’s 500 Index. The fund
closed to new investors in 1998 and its assets peaked at $110
billion in 2000.
Fidelity failed to reverse withdrawals when it reopened the
fund under Lange in 2008 after assets fell to about $40 billion.
Magellan’s performance suffered in 2008 when Lange bought
financial stocks including Wachovia Corp. and insurer American
International Group Inc., Christopher Davis, an analyst with
Chicago-based Morningstar Inc., wrote in a February report.
Lange was “eventually right, but most of his picks, such as AIG
and Wachovia, didn’t survive the financial crisis,” Davis
wrote.
Volatile Performance
Wachovia, based in
Charlotte, North Carolina, was taken
over by
Wells Fargo & Co. in 2008 as it was on the verge of
collapse. AIG was rescued the same year by the U.S. government,
which received warrants for 80 percent of the New York company’s
equity.
Magellan lost 49 percent in 2008. After it bounced back in
2009, returning 41 percent, the fund trailed the
S&P 500 in
2010, and again so far this year. Magellan suffered last year
from its holding in Helsinki-based mobile-phone maker
Nokia OYJ (NOK1V),
Lange wrote in a May regulatory filing.
Magellan was also volatile under Lange. Data compiled by
Bloomberg show the fund trailed more than 90 percent of
competing funds that invest in large-company stocks in 2006 and
2008, while beating more than 90 percent of peers in 2007 and
2009.
Magellan’s largest holdings include
Apple Inc. (AAPL), up 44
percent in the past year, as well as
Corning Inc. (GLW), which lost 22
percent during the same period.
Passive Investing Trend
As it suffered from comparatively poor returns, Magellan
also struggled against a broad trend among investors favoring
passive investing over active stock picking. Through August,
index mutual funds that invest in stocks gathered $96.3 billion
in deposits since 2008, while actively managed stock funds lost
$290 billion to withdrawals, according to Morningstar. Equity
exchange-traded funds, also based mostly on indexes, have
attracted $358 billion from 2008 through July, according to data
from the
Investment Company Institute, a Washington-based trade
group.
The Vanguard Total Stock Market Index Fund surpassed
Capital Group Cos.’ Growth Fund of America as the largest equity
mutual fund with $139 billion at the end of August, Bloomberg
data show. contact the reporters on this story:
Christopher Condon in Boston at
ccondon4@bloomberg.net;
Charles Stein in Boston at
cstein4@bloomberg.net
