Don’t Look Back, Magellan, Somebody’s Gaining On You

April 01, 1999

In mid-July Fidelity Investments' Magellan Fund sailed serenely past the $100 billion mark in assets.

As the largest existing mutual fund, Magellan is bigger than all stock mutual funds combined were in 1984 and bigger than the entire fund industry in 1979. Its assets are larger than the gross domestic product of Ireland and every state budget in the U.S.

But if the 36-year old Magellan and its parent are not heeding the late Satchel Paige's famous advice ("Don't never look back, something might be gaining on you.") they are having their serenity disturbed by an upstart from Malvern, PA.

The Vanguard 500 Index Fund is also nearing the $100 billion mark, with practically overwhelming cash inflows, spurred by the popularity of index funds in general and probably by Vanguard's bargain basement costs as well. In recent years, the S&P500's total returns have also significantly outpaced the Magellan's NAV, though the actively managed fund did beat the index in 1998. What's truly amazing, however, is the rapidity of the growth: At the beginning of 1997, the Vanguard 500 was about half the size of Magellan.

Some market analysts believe the Vanguard 500 will surpass Magellan by early 2000, while others say that the expected moment will occur before the end of this year.

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