Track Record

Magellan Finally Dethroned

Track Record

The eclipse was predicted for years. Finally on April 5 Vanguard 500 became the largest fund in the world with $107.2 billion in assets, surpassing Fidelity's Magellan Fund at $106.9 billion, according to fidelityinvestor.com.

The event is seen by many as confirmation that indexing will continue to gain market share at the expense of actively managed funds. An estimated 40% of cash inflows to mutual funds is being placed in index funds.

One factor hampering Magellan's growth was the closing of its doors to most new investors in September 1997. Critics have claimed it is too large to attempt to outmaneuver the market. Such a large fund, many feel, must inevitably drive up share prices of companies during the buying process and drive down prices during the selling process. Since Vanguard 500 buys smaller amounts of shares across across a larger number of firms, it is considered far less likely to drive shares up or down during buying and selling.

IndexFunds.com Staff