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Fidelity Gives Magellan Manager the Boot

After a spate of terrible performance, Fidelity finally hangs up on Harry Lange.

Christopher Davis, 09/13/2011

Fidelity said Tuesday that it is replacing Harry Lange, the manager on its long-struggling Fidelity Magellan FMAGX fund.

Lange is the latest in a string of Magellan skippers who failed to measure up against the fund's most famous manager, Peter Lynch, whose storied reign ended in 1991. Lange's immediate predecessor, Robert Stansky, posted middling results employing a bland approach that closely tracked the S&P 500 Index. Lange ditched Stansky's index-hugging ways, but performance deteriorated badly. From his Oct. 31, 2005, start through Sept. 9, 2011, the fund lagged more than 90% of its large-growth rivals with its mere break-even returns.

Lange had enjoyed ample success prior to Magellan's helm, most notably during his nearly 10 years at Fidelity Capital Appreciation FDCAX. Yet stock-picking mistakes dogged his tenure at Magellan. For example, he stuck with mobile-phone giant Nokia NOK as his top holding for much too long, failing to recognize the hit it had taken from Apple AAPL and other competitors. He also moved boldly into downtrodden financial stocks in mid-2008. Many of his picks, like American International Group AIG and Wachovia, didn't survive the 2008 financial crisis or did so just barely.

Lange's successor, Jeff Feingold, inherits a much-diminished Magellan. It is hardly a small fry, with $17 billion in assets. But it's a far cry from the $110 billion Stansky managed in early 2000 and the $52 billion Lange inherited when he took charge. Magellan, once the world's largest mutual fund, is now the ninth largest at Fidelity, dwarfed by the likes of the $74 billion Fidelity Contrafund.

For Feingold, Magellan is a giant promotion. Fidelity Trend FTRNX, which he has run since February 2007, has just $1 billion in assets. It remains an open question whether he can translate his style to a much-larger fund, though his tenure at Trend has been solid: Through August 2011, the fund was up 2.6% annually since his start, versus a 0.2% loss for the typical large-growth fund in that time. Feingold joined Fidelity in 1997 and has run several other funds, including Fidelity Select Financial Services FIDSX and Fidelity Worldwide FWWFX.

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Christopher Davis is a senior fund analyst with Morningstar and editor of Morningstar's Fidelity Fund Family Report, a monthly newsletter that offers independent, no-holds-barred guidance on the pros and cons of this dominant fund family. He welcomes e-mail but cannot give investment advice. Click here for a free issue of the Fidelity Fund Family Report.
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