BOSTON Fidelity Investments replaced Harry Lange on Tuesday as portfolio manager of its famed Magellan Fund after years of underperformance at the one-time flagship.
Lange, 59, becomes the latest in a long line of Fidelity managers who failed to repeat the success of Peter Lynch, the star stock picker who became a household name before retiring in 1990.
The fund was once run by Edward "Ned" Johnson, now chairman of the family-controlled company. Going forward, Fidelity named Jeff Feingold, 40, turning to another insider who has proven himself on smaller funds, but now faces a daunting task with the larger vehicle -- a description that once fit Lange as well.
Boston-based Fidelity's stock funds have struggled to evolve beyond the star manager strategy that worked well in the 1980s and 1990s. Last year, equity investors withdrew over $25 billion as its funds posted middle-of-the-pack three and five-year performance.
Lange stumbled repeatedly at Magellan, betting on victims of the 2008 financial crisis such as American International Group Inc and Wachovia, and favoring mobile phone maker Nokia.
Over the past five years, the fund has lost an average of 2.2 percent annually, trailing 96 percent of peer funds. Lange has been contrite in his notes to investors, acknowledging weak picks in technology and consumer stocks. But analysts have increasingly questioned why he was left in place.
The fund, once the largest in the nation with assets of over $100 billion during the 1990s, fell from $52 billion when Lange took over to $17 billion today. Lange's disastrous financial picks led to an almost 50 percent loss in 2008, prompting widespread customer defections.
To be sure, some of Fidelity's other stocks funds have posted far better performances.
Under manager Will Danoff, the $73.7 billion Contrafund has beaten 98 percent of peer funds over the past 10 years and continues to do well lately, data from Morningstar show. The $32.3 billion Low-Priced Stock fund beat 95 percent of peers over the past 10 years under Joel Tillinghast, who is due to return from a leave in January.
Fidelity also remains a titan in the fund industry thanks in part to its brokerage and retirement businesses. Both units steer a steady stream of assets into Fidelity accounts. The firm oversaw $1.6 trillion of managed assets and administered another $2 trillion as of the end of June.
Fidelity said Feingold will continue to manage several other Fidelity funds including the $1 billion Trend Fund, as well as Magellan.
POSITION TO BE DETERMINED
Lange will remain with Fidelity in a position to be determined, Fidelity spokesman Vincent Loporchio said. The company did not make available for comment Lange, Feingold or Ronald O'Hanley, who heads Fidelity's asset-management operations.
In a statement, Fidelity Equity Group President Brian Hogan said Lange, "has put in a great deal of time and effort to take on the difficult task of managing Magellan through a very challenging period."
Feingold "has a broad diversity of experience and his investment style is an excellent fit with Magellan's capital appreciation investment objective and flexible investment strategy," Hogan said.
Feingold joined Fidelity as an analyst in 1997 and posted a strong track record at the Trend Fund, which he has run since 2007. The fund gained an average of 5 percent annually over the past three years, outperforming 90 percent of similar funds, according to Morningstar.
By appointing Feingold, who graduated from Brown University in 1992 and received an MBA from Harvard University in 1997, Fidelity runs the risk of repeating past failures, analysts said.
"Many of his winners have been small and mid-sized companies," said Morningstar analyst Christopher Davis. "I'm not sure he'll be able to invest in the same kind of companies, managing a much larger fund."
Lange also had a strong record running a much smaller fund before taking over Magellan, Davis noted.
John Bonnanzio, who edits a newsletter for Fidelity investors, said the firm may have kept Lange in the job in the hope he would eventually stage a turnaround, but that seemed increasingly unlikely.
"I think there was an interest in letting him see if the portfolio bets he made would eventually work out, but there was no recovering from 2008," Bonnanzio added.