By CONRAD DE AENLLE FIDELITY INVESTMENTS is welcoming new shareholders into its venerable Magellan fund after shutting them out for a decade. With the fund's asset base shrinking, it is a sensible move for Fidelity, but should you accept the invitation?
The portfolio had an excellent performance in 2007 - when many others did not - and its manager, Harry Lange, is very well thought of. Anyone interested in a large-company growth fund could do worse than Magellan, but analysts and financial advisers encourage prospective investors to consider some of its competitors, too.
Magellan is just one fund among many now, but it used to stand above the rest. Peter Lynch, who ran it from 1977 to 1990, handily beat the market year after year with his aggressive-growth investing style.
Then the fund became a victim of its own, and his, success. It grew into the largest mutual fund ever and investors kept pouring money in even after Mr. Lynch retired and his successors showed themselves not to be of his caliber. Fidelity closed Magellan to new investors in 1997 after deciding it had become unwieldy.
Investors shut out of the fund did not miss much. Robert Stansky, the manager for most of the time that it was closed, "got away from Lynch's aggressive, eclectic, growth-oriented style," Dan Lefkovitz, an analyst at Morningstar, recalled. Magellan took on more of the characteristics of an index tracker and lost its performance edge.
Mr. Lange is regarded as an aggressive, imaginative manager - more like Mr. Lynch and less like Mr. Stansky. His style worked well last year; Magellan gained 18.8 percent, well beyond the 5.5 percent increase of the Standard & Poor's 500-stock index.
Magellan "has become a good choice for large-cap growth investors," said Jeff Tjornehoj, senior research analyst at Lipper. "Harry Lange has done a good job steering the fund away from the 'closet indexer' pejorative. He's investing with a lot of conviction."
Mr. Tjornehoj pointed to the portfolio's two biggest investments, Nokia and Corning, which are not among the large S.& P. 500 constituents that many managers favor.
SOME advisers are reserving judgment on Magellan. Harold Evensky, a financial planner at the Miami firm Evensky & Katz, says that Mr. Lange has spent much of his career on smaller portfolios and considers the two-plus years that he has run Magellan "far too short a time to evaluate the likelihood of long-term superior performance."
He also highlighted the volatility of Mr. Lange's returns. He and Mr. Lynch share a tendency to beat rising markets and lag falling ones.
Mr. Evensky offered six alternatives to Magellan that focus on large growth stocks, carry no sales charge, feature solid performance relative to risk over the last five years and have had the same manager in place for at least that long. Three are Fidelity products: Contrafund, Growth Company and Stock Selector; those from outside the family are Brandywine Blue, Janus Twenty and Turner Core Growth.
Mr. Lefkovitz described Magellan as "a good fund, but not the best." Ones that he and his Morningstar colleagues prefer in the large-capitalization growth category include Brandywine Blue, Harbor Capital Appreciation, Primecap Odyssey Growth, Vanguard Growth Equity, T. Rowe Price New America Growth and two from Fidelity: Capital Appreciation and Growth Discovery.
He expressed the same concerns as Mr. Evensky. Shareholders "need a strong stomach" to cope with volatility, Mr. Lefkovitz said, and then there is the issue that never seems to go away.
Magellan is smaller than it was - its asset base has shrunk to $40 billion, from $109 billion in 1999 - but it is far from small. In his other funds, Mr. Lange achieved much of his strongest results with small and medium-size companies, which are hard to own in amounts sufficient to influence the returns of a fund this large.
"For people who suffered through the years of underperformance, it makes sense to stay aboard," Mr. Lefkovitz said, "but it's hard to be No. 1 when you're that big."
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