Mutual Fund Whiz Is Set to Retire at Age 46

Investment wizard Peter Lynch announced Wednesday that he was retiring as head of the nation’s largest stock mutual fund, finishing a phenomenally successful career to spend more time with family and community.

“I spent about 21 years with Fidelity,” said Lynch, 46. “I’d like to spend 21 years doing something different.”

Lynch managed the Magellan mutual fund for Fidelity Investments for 13 years, guiding it through years that saw both bull markets and the Wall Street crash to establish a record of strong growth and performance.

The stock fund now has $13 billion in assets, compared to about $100 million in 1981, when it became publicly available to investors.

Helping draw assets was the fund’s performance: $10,000 invested in the fund on May 31, 1977, would have grown to $270,007 on Dec. 31, 1989, according to Fidelity estimates.

Lynch also amassed a personal fortune, estimated by Boston magazine at $25 million, and now wants to spend his days more leisurely with his wife and three children.

Lynch noted that his father died of cancer at age 46. “There’s nothing magic about 46,” he said. “But you think about those things.”

Lynch, who officially retires May 31, will join the board of trustees for Fidelity, the nation’s largest operator of mutual funds.

Fidelity Chairman and Chief Executive Edward C. Johnson III issued a statement saying, “Even if he never invests another dollar, Peter Lynch has won a place of honor in the history of money management.”

During the past five years, when it was the nation’s largest common stock fund, Magellan has outperformed the Standard & Poor’s 500 by an average of 6% annually, the company said.

Underpinning Lynch’s success was his method of long-term investing in sound companies, rather than trying to outguess the market as a whole--a strategy he outlined in his best-selling book, “One Up on Wall Street.”

Despite this success, Lynch said in recent months that it was becoming more difficult to find under-performing stocks that can yield big returns, because stock prices have continued their annual growth.

Lynch said Magellan now has about 13% of its assets in cash, about $1.7 billion, a level company officials say is an all-time high for the fund.

“What you need is a drop in the market or a big recession for big winners,” he said.

But Lynch said he’s still finding stocks to invest in and is confident the Magellan fund can continue outperforming the stock market as a whole. “Fidelity is loaded with talented people,” he said. “It’s possible Magellan will do better in the next five years with another person.”

Magellan’s new portfolio manager will be Morris Smith, 33, currently manager of Fidelity OTC Portfolios.

Smith’s fund, which focuses on smaller companies listed in the national over-the-counter market, also has performed well. In the five years ended Dec. 31, the fund had an annualized average return of 25.05%, compared to 13.96% for all small company growth funds, according to Lipper Analytical Services.

Magellan shareholders will be notified of the changes in the fund’s annual report, due to be mailed in May, officials said.

Joy Smith, a Fidelity spokeswoman, said the company was not immediately seeing many redemption orders from Magellan investors in the wake of Lynch’s announcement.

Lynch wouldn’t specify how he plans to spend his time, but he lamented that he hasn’t seen any Boston College hockey games this year even though the school is one of four finalists vying for the national championship.

“Something’s out of balance,” he said.