Fidelity to Reopen Magellan Fund to New Investors
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The Fidelity Magellan Fund (FMAGX), which was once the nation’s largest mutual fund with an asset at $100 billion, will reopen to new investors tomorrow, January 15, 2008 after shutting its door more than 10 years ago, according to a Fidelity announcement. The main reason to make the flagship fund available to new investors is to give the fund manager, Harry Lange, new cash to invest as the fund now has less than 45 billion in assets, of which nearly 85% are in retirement accounts.
In 2007, the fund returned 18.8%, easily beating the S&P 500 index by 5.5%. However, the performance in the past decade since it closed in September 1997 was less impressive, outperforming the benchmark by only 0.40%, according to Morningstar.
The fund currently has an expense ratio (ER) of 0.54% and yield 0.42%. To invest in FMAGX, an initial investment of $2,500 is required.
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Maybe it is just me but a fund that has lost more than half of its assets in 10 years doesn’t really seem that great. Maybe they should get a new manager. From how I understand it they are reopening and basically saying “Hey we lost a ton of money why not invest yours now?”
am I missing something?
I think you have to look at it as they want to give people more options and by opening the fund back up they are doing so. they key is with any stock and even at times with funds you have to know when to get in and when to get out.
i think you also have to look that the fund is at a low and I would hope it only has room to go up…
Rev: According to Fidelity, 85% of the fund’s assets were in retirement accounts. Since this fund has been around for a long time, the decline in assets of the fund could be the result that many have already started to withdraw their investments from the fund. Plus, since the fund has been closed to new investors for more than 10 years, the withdrawal rate must be much greater than the rate of new investments from existing investors.
My first question is, what happened in mid-2006 that resulted in a 20% immediate drop in the NAV? Other than that precipitous drop, the pattern seems to correlate with the S&P 500.
It would certainly suck to have purchased shares only to watch the value drop 30% in a couple months. And it would certainly suck to have been invested for 10 years and break even. Unfortunately, the chart probably does not take into account reinvested distributions, so it may not have been as bad as “break even”.
MBE, I wondered the same thing myself. But it turns out they did a big portfolio shuffling and had some unusually large capitol gains distributions at that time. The price reflects the amount that was paid out, and folks with their gains redistributed received extra shares to make up the difference so their total portfolio shouldn’t have lost anything because of it.
Something I recently learned about when I saw my yahoo finance portfolio drop like a rock when I had a lot of distributions in December. They dropped all right, but not as steeply as I had at first thought when it was happening. Oh, the things I learn when I actually pay attention.
“their total portfolio shouldn’t have lost anything because of it”
Of course, that is in a retirement account only. Taxable investors would have lost some to the taxman.