Word: magellans
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Jeffrey Vinik, manager of the $56 billion Fidelity Magellan Fund, the world's largest and most closely watched mutual fund, "beat the pants off the managers of other large funds," in the words of one analyst. Yet few people were surprised last week when Vinik simply beat it, abruptly resigning from FMR Corp., Fidelity's owner. His replacement is Robert Stansky, until now a low-profile manager of Fidelity's Growth Company Fund...
...aggressive manager had made the classic mistake of zigging when he should have zagged. Last year he dumped stocks and bought bonds even as the stock market routinely hit new highs. Although Vinik's record of a 17.2% average return over nearly four years bested most of his competition, Magellan's 4.3 million shareholders fidgeted as the fund returned just 2.4% on an annualized basis in the first four months of 1996, while the Standard & Poor's index of 500 stocks, the gauge by which mutual-fund managers are measured, returned 6.9%. Worse, at the end of April the tepid...
...perception of problems at Fidelity, a $442 billion cash machine based in Boston, whose 238 mutual funds command a leading 13% share of the U.S. fund industry. Late last year Vinik drew the attention of the Securities and Exchange Commission for publicly touting computer maker Micron Technology while Magellan quietly unloaded its Micron shares. This year Fidelity shuffled no fewer than 26 fund managers in March to perk up the funds' performance...
...over the small- and medium-size companies that Vinik preferred, in the manner of his mentor Peter Lynch. "Stansky will be a good fit," says Don Phillips, president of Morningstar, which tracks mutual funds. "What was always a little difficult for Vinik was that he was trying to run Magellan as if it were a smaller, more flexible fund." Stansky's approach promises less volatility in the performance of the fund. That's not a bad idea, since Magellan is fighting to stay high on the list of pension managers. The fund gets 90% of its new money from...
Latham says that the response to Kirshner's fundraising shows the merit of the Magellan project and Kirshner's enthusiasm...