Magellan Fund - Fund Performance

Fund Performance

Although most people believe that Peter Lynch is the cornerstone of Magellan’s performance, and ultimately the growth in assets invested in the fund, the best annual return the fund ever had was in 1965 when it returned 116.08%. In fact, the best three year record the fund had happened before Peter Lynch was at the helm when it returned 68.32% between 1965 and 1967. Peter Lynch took the reins in May 1977 and remained the manager of Magellan for the subsequent thirteen years. Between 1977 and 1990 the fund averaged a 29% annual return. He created the investment process commonly referred to as “Buy What You Know”.

Morris Smith replaced Lynch the manager of Magellan. During the two years he was there he managed to beat the S&P 500 by 7%. He decided to leave investing entirely after his experience at Magellan and has spent time pursuing religious activities. Jeffrey Vinik spent four years managing Magellan and during that time he produced an 83.70% cumulative return and outperformed the cumulative S&P500 return by 5.91%. Vinik is most often remembered as the manager who moved a high percentage of the portfolio out of technology stocks and into bonds at the wrong time, causing Magellan to underperform its peers for the first time in the fund’s history. However, others argue that Vinik merely moved into bonds early. Vinik moved Magellan into bonds in the fall of 1995. In the seven years ending in March 2003, on a total return basis, 10-year Treasuries returned 78 percent, AAA corporate bonds returned 46 percent, and, with dividends reinvested, the S&P 500 returned 31 percent. In addition, Vinik's strategy would have avoided the dot-com bust.

Robert ‘Bob’ Stansky is a direct disciple of Peter Lynch’s having worked as his research assistant from 1984 to 1987. During his time at Magellan Stansky managed to return 238% for the fund. However, the S&P 500 index returned 274% during the same period. This marked the only regime where Magellan underperformed the market. Magellan’s portfolio closely resembled the S&P 500 during Stansky’s tenure—so much so that Stansky himself helped coined the phrase ‘closet indexer’. Harry W. Lange represented a change for the Magellan fund. His approach was known as a 'go everywhere approach'. This means he was just as likely to buy small cap stocks as he was large cap stocks, value as he was growth, US companies as he was international.