Magellan Landing With A Thud

Fidelity is finally closing Magellan to new investors while it is only a mere $62 billion, and growing. If you think you will be missing out on a legend, you have until Sept. 30 to jump in. But you may be alone in doing that: The legend is now more of a myth.

Most professional Magellan watchers don’t think the giant fund is worth the 3 percent commission you’ll pay for it. That’s right: Magellan, the top-performing stock fund over the last 20 years, is not worth a lousy 3 percent load.

Investors seem to agree. Since the announcement last month, said Fidelity spokeswoman Robyn Tice, there has been no major inflow of new investors.

“Most retail investors already know there are lots of … good no-load funds out there,” said Jack Bowers, editor of the Fidelity Monitor newsletter.

Eric Kobren, executive editor of the Fidelity Insights newsletter, puts it this way: “Magellan is a matter of perception for a lot of people because it was the No. 1 fund over the last 20 years. But it isn’t going to be No. 1 over the next 20.”

While we’re bursting bubbles, that No. 1 ranking as the best growth fund over 20 years bears some scrutiny. Most of that growth came before the 1987 crash. Although the fund has had some excellent years since, Lipper Analytical Services Inc., a Summit, N.J., fund-ranking company, said Magellan ranked 32nd among all growth funds for the 10 years from Sept. 3, 1987, to Sept. 4 of this year, and 90th for the last five years.

Fidelity is also closing Magellan on an up note, the fund’s watchers say, as the redemptions that plagued it for the past year have stopped. Money is slowly flowing back in. New manager Robert Stansky has sold off the huge bond inventory left by predecessor Jeff Vinik and moved the fund more heavily into the big blue-chip arena where a fund of its size needs to play. The resulting performance makes it looks like Fidelity is closing the fund from strength, not weakness.

Magellan started the year with about $54 billion in assets. After a 24 percent gain in its net asset value so far, the fund should have about $67 billion just from performance, even if no new money came in. But it has only about $62 billion because shareholders pulled well over $5 billion out of the fund, even as cash continued to come in, mostly from retirement accounts.