Tuesday, January 15, 2008

Magellan Fund, Closed in ’97, Will Reopen

BOSTON (AP) — For the first time in a decade, new investors will be able to put money into a mutual fund that helped fuel Fidelity Investments’ rapid growth in the 1980s and 1990s, but has recently lost many retirement-age investors as they withdraw cash.

Fidelity said on Monday that it would reopen its $44.8 billion Magellan Fund to new investors effective Tuesday.

The company, which is based in Boston, closed Magellan to new accounts on Sept. 30, 1997, after a run of market-beating returns in the 1980s. While Magellan has enjoyed recent strong returns, its size has dwindled from its peak of $102 billion in 2000 because of the 1997 closure, intended to prevent the fund from becoming too big to manage.

In recent years, Magellan’s investors have crept closer to retirement, when many redeem investments to pay for needs after their working lives.

“In fact, 85 percent of the fund’s assets are earmarked for retirement, and the baby boomer generation has now begun to retire and tap those dollars,” Walter C. Donovan, president of Fidelity’s equity division, said.

Retirement-age clients typically make conservative investments to avoid having a sudden downturn deplete their nest eggs just before retirement.

By wooing new Magellan investors — particularly younger investors more comfortable with riskier investments — Fidelity hopes to give the Magellan manager, Harry W. Lange, greater leeway to choose growth stocks that may not have suited investors’ objectives in the past.

While the majority of Magellan’s holdings remain domestic stocks, Mr. Lange has expanded the fund’s international holdings amid faster growth overseas.

Eric M. Kobren, executive editor of Fidelity Insight, an independent newsletter for Fidelity investors, said Magellan “is a good, solid fund,” despite the recent withdrawals.

Magellan declined to $44.8 billion, from $50 billion, during Mr. Lange’s two-year tenure.

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