Fidelity opens flagship Magellan Fund to new investors
Donovan explains why it is in the interests of Magellan Fund shareholders to reopen the fund: "Having been closed for more than a decade, Magellan's shareholder base has matured and, in the normal course of investing, many shareholders have continued to redeem assets as they've met their financial goals. In fact, 85 percent of the fund's assets are earmarked for retirement, and the Baby Boomer generation has now begun to retire and tap those dollars," he says. "We believe that generating new sales to offset future redemptions will help stabilize the fund's cash flows and assist fund manager Harry Lange in most effectively directing investment strategies for the benefit of fund shareholders. It's effectively the inverse of the reason why we limited new purchases of the fund 10 years ago. At that time, we were seeing strengthening cash inflows, and we expected that trend to continue."
According to a report in the Boston Herald, John Bonnanzio, a group editor at Fidelity Insight, an independent newsletter, said baby-boomer withdrawals have hurt the fund. But he said the real problem has been its performance in recent years.
"For a while Magellan has not performed spectacularly," said Bonnanzio, who nonetheless praised fund manager Harry W. Lange for a benchmark-beating return of 18.8 percent last year.
Magellan reached a peak of $102 billion in the dot-com boom in 2000, but assets now stand at about $45 billion.
"Millions of Americans have relied upon the fund to help them reach financial goals such as saving for retirement, college, or buying a new home," said Walter C. Donovan, president of the equity division in Fidelity's Management & Research unit, in a statement. "We believe that the time is right to make Magellan available to a new generation of investors."