Magellan Fund Future Evaluated

Fidelity Investments is “examining” the possibility of closing its flagship Magellan Fund to new investors, said J. Gary Burkhead, who oversees Fidelity’s money management group.

“We have no current plans to close the fund, and it’s something we always look at,” said Burkhead, speaking at Morningstar Inc.’s annual mutual fund conference in Chicago.

Bob Stansky, Magellan’s new manager, would be “intimately involved” in any decision to shut the fund, Burkhead said.

Some analysts are critical of Fidelity for keeping Magellan open to new investors. They argue the $55 billion fund has gotten too unwieldy for any fund manager to direct effectively.

Magellan is by far the largest U.S. mutual fund. It has twice the assets of its closest rival, the $27 billion Investment Company of America Fund, which is managed by Los Angeles-based Capital Research & Management Co.

Fidelity closed Magellan once in the past. The fund was shut from mid-1965 to July 1981. Fidelity said it closed the fund to concentrate its marketing efforts on two other stock funds.

Fidelity is concerned about Magellan’s results and is committed to doing whatever is in the best interest of shareholders, Burkhead said.

Magellan’s returns are lagging in 1996 because of former manager Jeffrey Vinik’s decision to devote almost 20 percent of the fund’s portfolio to bonds at a time when the U.S. Treasury market was falling. The fund currently is up 2.42 percent on a total-return basis, compared with a 8.62 percent gain for the Standard & Poor’s 500 Index, according to Morningstar.

Stansky, 40, took control of Magellan on June 3, replacing Vinik, 37, who’s leaving Fidelity at the end of the month to start his own firm. Stansky previously managed the Fidelity Growth Company Fund to top-ranked returns.