Magellan Fund Manager to Quit; Successor Named
In a surprise decision, the manager of the nation’s biggest stock mutual fund is resigning to take an extended sabbatical.
Morris J. Smith, 34, who has directed the $20-billion Fidelity Magellan fund since mid-1990, will quit July 1 so that he can take his family to live in Israel for a time. He will be replaced by Jeff Vinik, 33, who has piloted Fidelity’s $4-billion Growth & Income fund since October, 1990.
In the 1980s, the Boston-based Magellan fund became the flagship stock fund of Fidelity--and perhaps the best-known fund in the entire industry--because of its stellar performance under legendary stock-picker Peter Lynch.
In the 15 years ended Dec. 31, 1990, Magellan rocketed 3,581%, the best gain of any stock fund. Even the second-best fund in that period, Twentieth Century Growth, was far behind Magellan, up 2,264%.
In the spring of 1990, Lynch shocked Wall Street by resigning at age 46, saying he wanted to spend more time with his family.
Though Smith, a relative unknown, faced enormous pressure upon succeeding Lynch, he steered Magellan to another two years of excellent returns: The fund has risen 28.9% since Smith took over, Fidelity says, versus a 21.3% total return for the benchmark Standard & Poor’s 500 stock index.
Smith’s decision apparently surprised even his own colleagues. In a statement, he said he and his wife “have always wanted our children to know Israel, so we plan to spend some time there. In addition, this will allow us time to consider our future plans and opportunities.”
Fidelity, the nation’s biggest mutual-fund firm with $169 billion in assets, said Smith will maintain a “loose affiliation” with the firm, but “may or may not” return.
The appointment of Vinik continues Fidelity’s tradition of naming relatively young managers to high-profile positions.
Vinik, who once served as an analyst under Lynch, compiled a strong record managing the Fidelity Contrafund from January, 1989, to September, 1990, and then the Growth & Income fund from October, 1990, to the present.
Through March, the Growth & Income fund has returned 55.3% since Vinik took over, compared to a 38.6% S&P; return.
Vinik said he was offered the job Monday, and thought about it for a few hours. He said his big concern was that the job would disrupt his family life. “I decided it would be manageable,” he said.
He declined to say what kind of changes he might make at Magellan, except that any changes initially would be “moderate.”
Although Magellan holds about 800 stocks, compared to 300 at Growth & Income, Vinik said both funds own shares “across the spectrum” of large and small companies. Also, both have been managed in a “bottoms-up” fashion, he said--meaning that stocks are evaluated individually, rather than purchased or sold as a group because of market or economic trends.
