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WHY FIDELITY ISN'T CRYING TOO HARD

FIDELITY INVESTMENTS' Magellan mutual fund (assets: $56 billion) is the incredible shrinking growth fund. Since April, investors have pulled out $3.8 billion more than they have put in. However, Fidelity isn't exactly hurting. David O'Leary of Alpha Equity Research says the lion's share has gone to other Fidelity funds (table).

O'Leary estimates that almost 98% of the flight money has remained in the company. One reason: A huge (76%) share of Magellan's assets comes from 401(k) or other retirement plans offered under contract to employers. If a plan offers only Fidelity funds, employees have no other investment options.

The primary beneficiaries of Magellan's distress have been Growth & Income and Contrafund. Even in July, when the market tanked, the pair drew Magellan money. Magellan lost almost $1 billion, but Contra netted $157 million; Growth & Income, $352 million.

Contrafund has turned out to be a smart move. While both funds are outshining Magellan, Contra is also beating the S&P 500-stock index. At least Magellan is stabilizing under manager Robert Stansky, who took over from Jeff Vinik in June. August's outflow was $573 million, down from $964 million in July. And during the month, Magellan even outperformed the S&P (2.52% to 2.11%) for the first time this year.

EDITED BY LARRY LIGHT By Lisa Sanders


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Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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