Along with the general market turmoil, exchange traded funds (ETFs) and mutual funds have been getting hit. But one of the oldest and most venerable mutual funds in particular is facing big losses as a result of the credit crises: the Fidelity Magellan (FMAGX).
In August, the fund hung onto shares from the troubled American International Group (AIG), and also boosted its position in Morgan Stanley (MS), reports Joe Morris for Ignites. At the end of August, AIG was Magellan’s seventh-largest holding, representing slightly less than 2% of the assets.
Wachovia (WB) is also a devalued holding that Magellan stuck with.
Year-to-date, the fund is down 30.6% and has $35 billion in assets. It comes with a 0.72% expense ratio. At one point, the fund held more than $100 billion in assets and became difficult to manage. It could only invest in large-caps at a time when small-caps were outperforming, costing it dearly in performance.
Magellan is one of the most famous mutual funds ever, run for years by the legendary Peter Lynch. Its large stake in some of the weakest spots in the market are one reason these mutual funds are going to continue to see huge outflows. When the markets turn around, ETFs are destined to get more than their share of these former mutual fund assets.
This also illustrates just one of the reasons ETFs make a better alternative than mutual funds – investors who want to know a fund’s stake in a Lehman or AIG need only look up the information online, where it’s available in real-time.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.