Fidelity Investments has named Jeffrey S. Feingold to run the $17.4 billion Magellan Fund, replacing Harry Lange, who oversaw a two-thirds decline in assets in what was once the largest U.S. mutual fund.
Magellan Ticker:(FMAGX) trailed 85% of rival funds over the past five years and shrank in size by $33 billion during Mr. Lange's almost six-year tenure, according to data compiled by Bloomberg. Mr. Feingold, 40, manages the $1.04 billion Fidelity Trend Fund Ticker:(FTRNX), which beat 84% of competing funds over the past year.
“His performance was deeply disappointing,” John Bonnanzio, editor of the Fidelity Insight newsletter, said of Mr. Lange. Mr. Bonnanzio said he was optimistic about the change in management, adding that Mr. Feingold “has a good record.”
Mr. Feingold, who graduated from Brown University and holds a master's degree from Harvard University, joined Fidelity as an equity analyst in 1997.
Mr. Lange, 59, a 24-year veteran with the firm, will stay at Fidelity and is exploring other opportunities within the company, Vincent Loporchio, a spokesman for Fidelity, which manages $1.6 trillion, said last week.
“The fund has generally underperformed its benchmark and, that said, we're confident Jeff Feingold can bring Magellan the opportunity to provide competitive long-term performance,” Mr. Loporchio said.
FINANCIAL STOCKS
Magellan, originally managed by Ned Johnson, Fidelity's chairman and chief executive, rose to prominence under Peter Lynch in the 1980s. Mr. Lynch guided the fund to gains of 29% a year from 1977 to 1990, compared with 15% annual returns for the S&P 500. The fund closed to new investors in 1998 and its assets peaked at $110 billion in 2000.
Fidelity failed to reverse withdrawals when it reopened the fund under Mr. Lange in 2008 after assets fell to about $40 billion.
Magellan's performance suffered in 2008 when Mr. Lange bought financial stocks including Wachovia Corp. and insurer American International Group Inc. Ticker:(
AIG), Christopher Davis, an analyst with Morningstar Inc., wrote in a February report. Mr. Lange was “eventually right, but most of his picks, such as
AIG and Wachovia, didn't survive the financial crisis,” Mr. Davis wrote.
VOLATILE PERFORMANCE
Wachovia was taken over by
Wells Fargo & Co. in 2008 when it was on the verge of collapse. AIG was rescued the same year by the U.S. government, which received warrants for 80% of the company's equity.
Magellan lost 49% in 2008. After it bounced back in 2009, returning 41%, the fund trailed the S&P 500 in 2010 and has continued to do so this year. Magellan suffered last year from its holding in Nokia OYJ Ticker:(NOK1V), Mr. Lange wrote in a May regulatory filing.
Magellan was also volatile under Mr. Lange. Data compiled by Bloomberg show that the fund trailed more than 90% of competing funds investing in large-company stocks in 2006 and 2008, while beating more than 90% of peers in 2007 and 2009.
Magellan's largest holdings include Apple Inc. Ticker:(AAPL), up 44% in the past year, and Corning Inc. Ticker:(GLW), which lost 22%.
