Magellan’s Log: Passing S&P; 500

Here’s a change of pace: Fidelity Investments’ giant Magellan Fund is outrunning the bellwether Standard & Poor’s 500 index.

After four years of trailing the S&P; 500, sometimes badly, Magellan is set to beat the S&P; in the first quarter--barring a last-minute shake-up in their respective performances.

As of Friday, Magellan--the nation’s largest fund, with $69 billion in assets--had a year-to-date total return of 13.8%, compared with a 13.3% return for the S&P.;

Until the mid-1990s, Magellan had been renowned for its consistent market-beating performance. But in early 1996 then-manager Jeffrey Vinik made a bearish bet against the market and invested heavily in cash and bonds. The move backfired. Vinik left Fidelity in mid-1996 and was succeeded by Magellan’s current manager, Robert Stansky, who has since reallocated most of Magellan’s cash holdings into stocks, particularly big-capitalization issues such as those that comprise the S&P.;

“Bob has done an excellent job of improving Magellan’s performance,� said Fidelity spokesman Scott Beyerl.

Fidelity last year closed Magellan to new investors, although members of certain retirement savings plans can still start to invest in the fund. It gained 26.6% last year versus 33.4% for the S&P.;

Russ Kinnel, who follows Magellan for fund tracker Morningstar Inc., agreed that Stansky “is clearly a talented manager.� But, Kinnel said, Magellan’s sheer size curtails how aggressively it can invest in individual stocks, and that makes the fund less attractive than some other stock funds.

“Stansky’s good enough that he could beat the S&P; for a year or two, but over the long haul it’s a pretty difficult task,� Kinnel said. “Even if it [Magellan] was still available, I wouldn’t buy it.�