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Vinik shuts hedge fund
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October 26, 2000: 3:49 p.m. ET
Former Fidelity Magellan chief to close $4.2B fund, citing personal reasons
By Staff Writer Martha Slud
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NEW YORK (CNNfn) - Money manager Jeffrey Vinik, who launched a hedge fund four years ago after a volatile stint as portfolio manager of Fidelity's Magellan Fund, announced Thursday he will close his $4.2 billion hedge fund at the end of the year, citing personal reasons.
The Boston-based fund, which reported a nearly 46 percent jump in after-fee returns as of Oct. 20, is one of the largest hedge funds on the market and has been one of the leading performers in its category this year. Hedge funds are risky investment vehicles that are largely unregulated, and attract wealthy clients and institutions because of their higher returns.
 Vinik, 41, and the fund's other two principals, Mike Gordon, 35, and Mark Hostetter, 41, said recent market turbulence was not a factor in closing the fund. They said they want to devote more time to their personal lives and have decided to manage a smaller pool of assets for themselves and their families.
"The volatility in the U.S. stock market of recent months did not enter into our thinking. In fact, given our conservative outlook on this year's market, our portfolio has been only modestly invested and extremely liquid for several months," Vinik said in a statement. "The decision to return money to our investors should not be interpreted as our being particularly bearish [or particularly bullish] on the months ahead."
In a telephone interview with CNNfn.com, Vinik added that the decision to close the fund was made over the past several months.
"It's completely that I want to spend more time with my family," he said. Vinik has three young children and his wife is expecting.
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"The volatility in the U.S. stock market of recent months did not enter into our thinking."
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Jeffrey Vinik
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Vinik left Fidelity Magellan in 1996, after a four-year tenure as the Magellan fund's manager. He was named "Fund Manager of the Year" in 1993 by Morningstar and again, in 1995, by Money magazine. But in 1995, he made a big miscalculation, selling semiconductor and telecom stocks in favor of bonds and value stocks. The tech sector then went on to soar and it was too late to shift the fund's investments back into technology.
Many mutual fund managers have recently left their jobs for more lucrative posts as hedge fund managers. Vinik's performance as a hedge fund manager has been "off the charts," said Roxanne Martino, a hedge fund expert.
"I think he's done a fabulous job," Martino said. "He did a lot of things the right way; he raised money at the beginning, then stopped and then just managed it ... He stuck to his expertise."
According to the fund's data, Vinik Asset Management has returned 440 percent after fees for the four years the fund has been in business and has risen 45.6 percent this year through Oct. 20. That compares with a 4.2 percent drop for the S&P 500. Other hedge funds that use a similar "long-and-short" equity investing strategy have risen an average of 12.4 percent, as of Sept. 30, according to data compiled by Martino's firm.
The Fidelity Magellan fund, which now has about $103.54 billion in assets, is down 5.75 percent so far this year.
The fund managers said they achieved their results through "hard work and plain-vanilla stock picking." They said they focused on the equity market and steered clear of futures, options and derivatives, reducing the fund's risk.
"What we've done is work real hard and to own companies with outstanding earnings that are selling at reasonable valuations," Vinik said. Despite the market's volatile year, "underneath that it's been an excellent stock picking environment."
The fund, which has a minimum investment of $2 million, does not disclose its holdings, but Vinik said it has focused on sectors including health care, financial services and restaurants. The portfolio averaged 350 companies at a time.
The fund will return substantially all of its assets to investors. Gordon will manage a smaller fund consisting of his family's assets as well as those of a few of the firm's existing investors. 
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