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| Author |
Message |
mcpoz
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Fidelity Magellan fund
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May 4 11:47 UTC 1996 |
Does anyone know what has driven Fidelity Magellan down in such an extreme
jump (-13 points)?
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| 26 responses total. |
chelsea
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response 1 of 26:
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May 4 11:59 UTC 1996 |
Don't know for sure but Magellan is an immense bloated fund and
that tends to present it's own problems. I tend to think there
is some benefit to a fund closing before it gets so huge and
challenging to manage.
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srw
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response 2 of 26:
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May 5 03:59 UTC 1996 |
No, there is a much simpler explanation. Magellan just issued one of its
semiannual distributions. The distribution is some mixture of dividends,
short term CG distributions, and LTCG dists. The exact mixture can be found
out by calling Fidelity, and it will show up on statements, but all I know
is that the total distribution, paid as of Friday 5/3 is exactly $13.35.
The NAV will be reduced by the amount of the distribution.
The good news is that investors did not lose the $13.35. It was either
reinvested or distributed. All funds are required by law to declare these,
so that the investors are forced to pay taxes on them. That's the bad news.
The particularly high distribution this time is due to the fact that Vinik
sold off a lot of Magellan's holdings at a profit.
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mcpoz
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response 3 of 26:
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May 5 12:20 UTC 1996 |
Thanks - I have been tracking it, but have not invested in it yet. It had
a similar drop in January.
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srw
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response 4 of 26:
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May 6 02:28 UTC 1996 |
My records show that the last dividend that they paid was on Dec 15,
$4.95/share
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marcvh
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response 5 of 26:
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May 6 16:43 UTC 1996 |
Note that it is the case that Magellan has not been up to the standards
people normally judge it by of late; its performance has lagged behind
indexes and similar funds so far this year. Combine that with its immense
size, the SEC's investigations of its management and its load and you end
up with something I personally stay away from. YMMV.
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chelsea
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response 6 of 26:
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May 26 10:27 UTC 1996 |
Magellan's manager (Vidick?) just got canned. The fund is underperforming
market averages and Fidelity had to do something. They should close
the fund and let it get to a less bloated size.
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mcpoz
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response 7 of 26:
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May 26 13:28 UTC 1996 |
You know for sure that when they announce that "he isn't being fired", that
he was fired!
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chelsea
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response 8 of 26:
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May 26 17:53 UTC 1996 |
What did it do last year, 4/6% or something, when the market *averaged*
10.5%? Lynch stated in an interview for Money Magazine that Magellan's
current management efforts can't be compared to what he did with the
fund simply because of the added difficulties of its current size and
a bull market that's gone on for so long with so much stock being
overvalued.
I wouldn't buy Magellan right now. And if I owned it I'd be
nervous about how long to hang in there.
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srw
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response 9 of 26:
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May 27 00:21 UTC 1996 |
Vinick is his name. He got nervous and sold off the technology stacks too
soon. The new management will take a different approach when they take over
(in about a week, I think.) I have some money in Magellan, and I'm not taking
it out quite yet.
You could put your money in an index fund if you want to do as well as the
market. Of course that money willl do as badly as the market when it goes
down, too. Magellan is fairly exposed to downturns, but not at the moment with
20% in bonds. It's a double-edged sword that only makes sense viewed with
hindsight.
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marcvh
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response 10 of 26:
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May 27 05:08 UTC 1996 |
What's ironic is that Vinik lost because he was trying to time the market.
Lynch knew better.
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chelsea
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response 11 of 26:
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May 30 22:41 UTC 1996 |
The latest issue of Newsweek has an article on the Magellan fund.
Their bottom line - sell and get out unless you would take a big
tax hit on the gain. Certainly don't put any more more into it
even in the form of dividends.
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katie
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response 12 of 26:
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Jun 1 04:38 UTC 1996 |
Newsweek has no business giving advice like that. Causing a fund to go
into net redemption.
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srw
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response 13 of 26:
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Jun 1 05:39 UTC 1996 |
Newsweek is allowed to express their opinion.
There are, in fact, some good reasons behind that opinion.
Nevertheless, I am not pulling my money out, and I'll bet most the billions
invested there will stay put. Magellan is in good shape at the moment to
handle a lot of redemptions.
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lucey
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response 14 of 26:
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Jun 4 03:53 UTC 1996 |
Remember the Law of Diminishing Returns? You reach a point where each
additional dollar put into a business venture yields a lower and lower return
That either has or will be the case with Magellan. Sure, there are a lot of
multi-billion dollar funds out there, but none with either the size or the
rate of growth of Magellan. While it is possible that the fund can outperform
the market quite nicely, I believe y money would be better off in a smaller
fund.
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srw
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response 15 of 26:
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Jun 6 06:47 UTC 1996 |
Well, that would depend on how well run the smaller fund is. In general I
don't disagree that its monstous size is a liability, but aside from this
recent setback, they have outperformed many smaller funds.
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wjw
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response 16 of 26:
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Jun 17 19:35 UTC 1996 |
re 14:
They have been saying that about Magellan for 15 years or so. Lynch
kept proving them wrong.
re 11:
What does Newsweek know? Have they analyzed the entire portfolio of Magellan?
I doubt it.
Personally, I have owned Magellan for about 10 years, and my investment is
up by 311%. I also own Windsor and my investment is up 349%. I'm not
complaining about either, and the performance over the last 6 months is not
of critical interest to me.
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mary
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response 17 of 26:
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Aug 30 13:21 UTC 1997 |
As of September 30, 1997, Magellan will be closed to new investors.
Those already in the fund will be allowed to continue investing.
Magellan is huge. With over $61 billion in assets it is 50 percent
larger than the next biggest mutual fund. It is so big it can't
be managed as well as smaller investment options and has been
underperforming for three years now - three years where most
other stocks have been enjoying high returns.
Big is not always better. This move is long overdue.
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i
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response 18 of 26:
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Aug 31 03:44 UTC 1997 |
Hmm. My understanding is that much of Magellan's inflow over the past
few years has been retirement plan dollars. Closing to NEW investors
will do very little to retard the flow from that source of bloat. Though
continued bad press and poor performance sure will. Last I know, the
folks at Morningstar rated Magellan in the BOTTOM 20% of it's category of
mutual funds. (Over the 3 years ending in June, it's about 6% per year
behind the S&P 500 index. With higher risk.)
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srw
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response 19 of 26:
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Sep 4 06:06 UTC 1997 |
Under Peter Lynch, Magellan was able to outperform most of its
competition despite being huge by comparison. No one cared if it was
huge, as long as it was working, and it was.
Then, he left and his replacement (or was it his replacement's
replacement) move it to bonds at a very bad time, resulting in
significant underperformance. I am still not convinced that it was its
bigness that did it in.
however, it is true that it can't be both big and nimble. This change is
not going to have much effect. I agree with Walter. It is still open to
anyone whose company is enrolled in a plan that includes it. This kinf
of money is like 70% of what's in it.
Despite closing, it is still colossal. I think the closing is a total
ho hum.
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mary
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response 20 of 26:
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Oct 10 10:47 UTC 1999 |
It's been over three years ago that this item was entered and
folks speculated about how Magellan would do. So, how has
it done?
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i
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response 21 of 26:
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Oct 10 22:25 UTC 1999 |
Some average annual returns through 8/31/99 numbers i've got handy:
1 year 3 year 5 year 10 year
Magellan 46.47% 26.85% 22.05% 17.44%
S&P 500 Index 39.81% 28.57% 25.10% 17.09%
As the 1-year numbers show, Magellan is on a tear right now. '97 was
a disaster and '98 bad, while '91 and '93 were very good. Last I knew,
Magellan's had about $100 billion in assets, and was closed to new
investors. Robert Stansky has been running the fund since mid-'96.
He seems to be getting the turnover rate down, so taxable investors
can hope for reduced active-management-tax-penalties in the future.
With their huge recent returns and sky-high multiples, neither the
Magellan Fund nor the S&P 500 look like good investments to me right
now. Though "buy high, sell low" is a very popular investment
strategy in this country....
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marcvh
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response 22 of 26:
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Jun 23 18:21 UTC 2005 |
Well, it's been a few years since we last talked about this one. As
of today, Morningstar rates Magellan a two-star (i.e. below average)
fund. It's still closed to new investors, not that it would be likely
to attract many.
There was much talk in this item about how, in a downturn, Magellan's
management would be able to respond so that it would not fall as far.
Let's see how that worked out; here are return percentages:
2000 2001 2002 2003 2004
Total return % -9.3 -11.7 -23.7 24.8 7.5
Diff S&P500: -0.2 0.2 -1.6 -3.9 -3.4
So, we see that in the downturn this fund still pretty consistently
underperformed its index, and then when the recovery started it
continued to underperform its index. It now trails the index for
1, 3, 5, and 10 years of returns. And it hasn't offered less risk
than the index either.
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mary
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response 23 of 26:
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Jun 23 20:56 UTC 2005 |
Can a fund be too big? I tend to think of funds like Magellan as bloated
cruise ships - popular with the masses but way to big to react with quick
turns.
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marcvh
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response 24 of 26:
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Jun 23 21:58 UTC 2005 |
Well, since you entered #17, the fund has shrunk from $61b to $56b. I
seem to recall reading that a lot of the money in Magellan was in 401(k)
funds, and presumably a whole lot of people have changed jobs at some
point over the past eight years.
Vanguard's 500 Index fund is roughly twice that size, but of course as an
index fund it doesnt try to deftly swoop in and out of markets and so
therefore I dont see how it could become "too big" unless it started to
constitute a substantial percentage of the total market cap of the whole
S&P 500. I suppose it could get big enough that it starts to have an
excessive impact on the stocks that move in and out of the index over
time, which is a reason to prefer a broader offering like their Total
Stock Market Index fund.
Many investors, including me, dont really believe in "quick turns" as an
investment philosophy anyway. If I want to gamble, I'll take a couple
hundred bucks and have a fun day at the track.
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