The Wall Street Journal-20080117-Magellan Is Reopened- Should You Buy-- The Famous Mutual Fund Has Revived Under Lange- Who Gets Bigger Bankroll
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Magellan Is Reopened: Should You Buy?; The Famous Mutual Fund Has Revived Under Lange, Who Gets Bigger Bankroll
Fidelity Investments has made Magellan Fund available to new investors for the first time in more than a decade, throwing a spotlight on the growth-stock investing talents of manager Harry Lange and, not incidentally, on the mutual-fund giant itself.
Magellan reopened Tuesday. Fidelity wouldn't provide specific details but said investors have already established a "substantial number of new positions" in Magellan.
The $45 billion large-company growth fund is known for famed manager Peter Lynch in the 1980s. The fund lost much of its magic in the early 2000s, before rebounding under Mr. Lange, who took over on Halloween 2005 from Robert Stansky.
"The popular perception is this is a once-great fund long past its heyday. After Lange took over, we turned a lot more positive," said Dan Lefkovitz, analyst at investment researcher Morningstar Inc.
A $10,000 investment in the fund when Mr. Lange came aboard would have been worth $13,427 at the end of 2007, while the same amount invested in the Standard & Poor's 500-stock index was valued at $12,648. The fund is down 7.4% this year through Tuesday, in line with its large-cap growth peers but worse than the S&P 500's 5.9% slide, says fund-tracker Lipper Inc.
Still, Mr. Lefkovitz added: "It's one to consider. Lange is an outstanding portfolio manager. He's proven himself in many different markets."
Mr. Lange, 55 years old, is a 20-year Fidelity veteran who had proven himself at the helm of the smaller Fidelity Capital Appreciation Fund and Fidelity Advisor Small Cap Fund. He made a quick impression at Magellan as growth stocks came back. Magellan gained 18.8% last year, topping the S&P 500 by more than 13 percentage points and the Russell 1000 Growth Index by seven percentage points.
For several years before Mr. Lange took over, Magellan was criticized for looking too much like a clone of its S&P 500 benchmark. But now, "this is a fund that looks and acts differently than any market benchmark," Mr. Lefkovitz said. "You are getting true active management here."
Mr. Lange has "always liked technology, and he's a very good tech investor," said John Bonnanzio, group editor of the Fidelity Insight newsletter, which tracks Fidelity's fund offerings.
It has helped that Mr. Lange applies an opportunistic, go-anywhere style to stock selection. Along with a strong bias for technology and telecommunications companies, the portfolio has put a sizable 25% of assets into stocks based outside of the U.S.
"I'm willing to pay a premium for the best growth companies," Mr. Lange said in a telephone interview. "There's so much more growth in overseas economies right now, I would maintain a good healthy number of foreign stocks."
"Lange's decision to lighten the portfolio's exposure to financials and up its technology stake has really paid off, " Mr. Lefkovitz said.
With the downturn in the U.S. stock market, many funds, especially value-oriented portfolios, are again allowing new investors. Typically, this move reflects an investment style that's out of favor, and in fact many advisers recommend approaching a fund's reopening with caution.
But Magellan is reopening at a time when the growth stocks have staged a comeback. Bringing in new money now is intended to give Mr. Lange greater ability to maintain his individual style without compromising his decisions or shareholders.
There is a question of asset size. Magellan was once the nation's largest mutual fund -- assets under management approached $106 billion at the end of 1999. At $45 billion, it's "a shadow of its former self," said Mr. Lefkovitz. "But it's still a pretty big shadow."
Mr. Lefkovitz is confident Mr. Lange can handle the new money that comes in. "If the shift to growth keeps up," he said, "this fund should continue to do pretty well."
