Magellan's record since famed investor Peter Lynch oversaw the fund is marked by fund-manager turnover and a big run-off in assets as its performance has lagged its benchmark and that of its peers.
Magellan isn't alone in seeing shrinking assets as skittish investors are jumping in and out of funds this year. Redemptions from long-term mutual funds reached $32.5 billion in August after outflows of about $17.1 billion in July. "August marked the most severe mutual fund outflows since November 2008," Morningstar said.
The industry's actively managed funds, from which fund firms generate most of their revenue, have felt the lingering sting of losses from 2008's stock-market blowup and individual investors' move toward indexed exchange traded funds, said Todd Rosenbluth, a mutual fund industry analyst for Standard & Poor's Capital IQ.ETFs took in $947 million in August, following July's huge $17.2 billion. U.S. ETFs have realized only a single month of outflows in the trailing 12 months, according to Morningstar. As for manager turnover, Mark Coffelt, manager of the $40 million Empiric Core Equity Fund (EMCAX), said that "every manager is under the gun. It's been a horrible decade and a very difficult time to invest." He said it's particularly tough on managers of the biggest funds because sometimes there's too much money and not enough attractive investments. "Look at what Warren Buffett said: 'Size is the anchor of performance.' Even he did better in the market when he didn't have as much capital." The returns at Magellan have been bitterly disappointing to investors, many of whom expected it to continue to post the annual 29% returns seen under Lynch, who ran Magellan from 1977 through 1990.