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Fidelity's Magellan Fund Opens To Investors Today

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By MARK JEWELL, The Associated Press

Published: January 15, 2008

BOSTON - 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 '90s, but has recently seen many retirement-age investors withdraw their cash.

The nation's largest mutual fund company said Monday that it will reopen its $44.8 billion Magellan Fund to new investors effective today.

Boston-based Fidelity closed Magellan to new accounts on Sept. 30, 1997, after a run of market-beating returns in the 1980s by star money manager Peter Lynch and three lesser-known successors in the 1990s.

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 protect existing investors by preventing the fund from becoming too big and unwieldy 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," said Walter Donovan, president of Fidelity's equity division.

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

By wooing new Magellan investors - particularly younger investors more comfortable making riskier investments - Fidelity hopes to give current Magellan manager Harry Lange greater leeway to choose growth stocks that might have conflicted with investors' objectives in the past.

"We believe that generating new sales to offset future redemptions will help stabilize the fund's cash flows, and assist Harry in most effectively directing investment strategies for the benefits of fund shareholders," Donovan said.

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

Last year was Magellan's best performance since 2003, with growing investments in technology stocks such as Google and overseas holdings. Magellan posted a nearly 19 percent return.

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