Word: vanguards
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Dates: during 2000-2009
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Fidelity Investments remains the 800-pound gorilla of the mutual fund world, with $1.1 trillion of assets under management. But fund companies like Vanguard and American Funds are growing faster, which is why Fidelity this week intensified its makeover by replacing the manager of its most visible fund, the $52 billion colossus Magellan. Market-lagging Robert Stansky, who had headed the fund since 1996, has been replaced by Harry Lange, former manager of the Fidelity Capital Appreciation Fund...
...Magellan, once the largest stock fund of any kind, has seen its assets shrivel to less than half its peak of $110 billion in 2000. It lost its biggest-fund title to the Vanguard Index 500 in April 2000, and isn't even Fidelity's largest fund today-it now trails the $56 billion Fidelity Contrafund. But Magellan remains by far the company's most visible-and hence most important-fund. During half of the years in the 1977-to-1990 tenure of the incomparable Peter Lynch, the fund recorded gains of more than 30%. To some of the company...
...management switch at Magellan is yet another attempt to re-instill the kind of bold stock-picking of Lynch's heyday. "We have a very different business model than Vanguard or American," says Fidelity spokeswoman Anne Crowley. "Half our revenues come from non-fund, fee-related businesses like the brokerage business, where we are a significant player." Indeed, Lange is expected to emulate Lynch's method of mixing up the portfolio with some smaller companies. Even with the fund having lost half its assets, it remains a behemoth, which leaves Lange confronting the same hurdle that tripped up Stansky...
...There is little doubt that Fidelity is feeling pressure from Vanguard, the low-cost fund company that specializes in passive index-fund investing as opposed to Fidelity's preferred style of active management. Index investing has soared in popularity. American Funds is a dominant provider of funds sold through financial advisers and has used that network to stoke its growth, as opposed to Fidelity, where only a portion of its funds are sold through advisers and which traditionally has relied on good performance so its funds stand...
...however much I loathe you, I worry even more about your inheritor. My deepest fear, Core, is that the Gen Ed vanguard of today will produce a report so dodgy, so obsequious to “internationalism,” that it will only recreate you into an even greater monstrosity...