Magellan Fund Back on Course: 90% in Stocks

Fidelity Investments’ flagship Magellan Fund is almost back to normal.

The world’s biggest mutual fund had almost 90% of its assets invested in equities, as of Oct. 31, and 8.7% of its assets in bonds, said a report released by Fidelity on Wednesday. Magellan had 9.8% of its assets in bonds as of Sept. 30.

When Robert Stansky officially assumed control of the $55.8-billion fund in June from former manager Jeffrey Vinik, the fund had 19.3% of its assets in bonds, mostly U.S. Treasuries.

Vinik made a big bet on bonds in a period when stocks were rallying and the U.S. bond market was floundering. The result: Magellan badly lagged other stock funds and the benchmark Standard & Poor’s 500-stock index in the first half of 1996.

And its poor performance resulted in a cut in the management fee charged on the fund by more than one-third, Fidelity said in its monthly fund guide.

The fee fell from 0.73% of total assets at the end of March to 0.47% at the end of September, costing Fidelity tens of millions of dollars.

The monthly fee is calculated using a complex formula based on the fund’s performance relative to the 36-month moving average of the S&P; index, and is reported publicly only twice a year.

Magellan’s performance--while still lagging--has improved since Stansky was named to succeed Vinik.

As of Tuesday, the fund was up 12.8% so far this year; the S&P; 500 was up 23.9%.