Magellan Fund fees for Fidelity drop sharply

Tue Nov 22, 2011 1:49pm EST

Nov 22 (Reuters) - Management fees earned by the famed Magellan Fund at Fidelity Investments fell 37 percent during a recent six-month period, leaving the fund's board with room to seek more action in the coming year to spark a turnaround.

In September, Fidelity replaced Harry Lange as Magellan's manager after years of poor performance. Fidelity disclosed on Tuesday that Magellan earned $32.5 million in management fees for the Boston-based company during the six months that ended Sept. 30.

Magellan's management fees would have been higher, but a negative $22.7 million performance adjustment knocked them down, Fidelity said in a filing with the U.S. Securities and Exchange Commission. In the year-ago period, Magellan's management fees totaled $51.2 million after the impact of a negative performance adjustment.

Magellan had $15.2 billion in net assets at the end of September. Fidelity named Jeff Feingold to manage a fund once run by Edward C. Johnson III, who is chairman of the world's second-largest mutual fund company.

At the end of September, Magellan's largest three holdings, in order, were Apple Inc , Google Inc and Amazon.com Inc .

Magellan has been outperformed by most of its peers over the past several years, according to Fidelity. If that trend continues, more actions could be coming.

"The board discussed with (Fidelity) actions that have been taken by (Fidelity) to improve the fund's disappointing performance relative to its peer group and benchmark," according to the fund's semiannual report to the SEC." ... The board will continue to closely monitor the performance of the fund in the coming year and discuss with (Fidelity) other appropriate actions to address the performance of the fund."