Jeffrey Vinik, manager of the $56 billion Fidelity Magellan Fund, the world's largest and most closely watched mutual fund, "beat the pants off the managers of other large funds," in the words of one analyst. Yet few people were surprised last week when Vinik simply beat it, abruptly resigning from FMR Corp., Fidelity's owner. His replacement is Robert Stansky, until now a low-profile manager of Fidelity's Growth Company Fund.
While Vinik, 37, and the company denied that he was pushed--and he most likely wasn't--the aggressive manager had made the classic mistake of zigging when he should have zagged. Last year he dumped stocks and bought bonds even as the stock market routinely hit new highs. Although Vinik's record of a 17.2% average return over nearly four years bested most of his competition, Magellan's 4.3 million shareholders fidgeted as the fund returned just 2.4% on an annualized basis in the first four months of 1996, while the Standard & Poor's index of 500 stocks, the gauge by which mutual-fund managers are measured, returned 6.9%. Worse, at the end of April the tepid showing had caused Magellan's average growth over three years to trail that of the S&P 500 for the first time in Vinik's tenure. "If you lag behind the index over three years, you can expect to be out of there soon," says Jack Bowers, who edits the Fidelity Monitor, a newsletter that tracks Fidelity.
In fact, Vinik had become a lightning rod for the public's perception of problems at Fidelity, a $442 billion cash machine based in Boston, whose 238 mutual funds command a leading 13% share of the U.S. fund industry. Late last year Vinik drew the attention of the Securities and Exchange Commission for publicly touting computer maker Micron Technology while Magellan quietly unloaded its Micron shares. This year Fidelity shuffled no fewer than 26 fund managers in March to perk up the funds' performance.
Vinik, who plans to start his own investment company called Vinik Asset Management, told TIME that he decided to leave "in the past couple of weeks," after lengthy talks with his wife. "It was a family decision," he explains. Up until now, he says, his extended and successful stay at Fidelity had allowed him to spend "good quality time" with his three children. He claims to look back with satisfaction, having met a personal-performance goal by consistently topping the S&P 500 index. "With 20/20 hindsight," he concedes, "I wish I hadn't bought bonds when I did." Sounds just like the rest of us amateurs.