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Rocky times ahead for Magellan Fund
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July 11, 1996: 11:51 a.m. ET
From Correspondent Sean Callebs
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NEW YORK (CNNfn) - Disgruntled investors and a soft market have helped drag assets placed in the Fidelity Magellan Fund, the nation's largest mutual fund, down to $53 billion -- a nearly $4 billion drop since March 31, according to new figures.
Since June alone, the fund has lost $2 billion, leading many longtime Magellan followers to wonder what lies ahead.
Analysts who track Fidelity say investors are pulling out because of the fund's weak performance this year, as well as publicity surrounding a shakeup in which Robert Stansky replaced fund manager Jeffrey
Vinik, who quit to start his own company.
Prior to his departure, Vinik had also faced negative publicity about alleged conflicts of interest in the fund's investment selections.
Magellan's performance had also been weighed down by nearly $10 billion in weak-performing bonds, as well as recent declines in some of its biggest stock holdings -- General Motors, Chrysler, CSX and Digital Equipment.
But now, many Magellan followers hope Stansky will revive the slumbering behemoth.
During his first five weeks at the helm, Magellan has slightly outperformed major market indexes.
Still, that has not revived confidence in the fund.
"There were many people that weren't satisfied with Magellan's 1 percent return when many of the other growth funds were earning 7 or 8 percent," said Donald Dion of the Fidelity Investment Advisor, a group that tracks the performance of Magellan and other funds run by Boston-based Fidelity Investment Co.
Morningstar analysts Russell Kinnel said Magellan "is not going to be the top fund any more, but it certainly can produce above-average results. Stansky's got a great track record."
Analysts expect Stansky to invest more heavily in tech stocks such as Oracle and Cisco Systems, while they are believe he will begin unloading Magellan's bond holdings.
However, some believe Magellan has just become too big to navigate volatile markets.
Without taking sides, Morningstar analysts point out that Magellan had excellent returns when it "only" had $35 billion of investors' assets under management. But since Magellan climbed into the $50 billion range, the fund's performance has suffered. 
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