Magellan manager leaves, so what?

In announcing his retirement this past week, Robert Stansky was able to momentarily do something for the Fidelity Magellan Fund that he mostly failed to do in his decade at the helm.

He made Magellan relevant again.

Once the world's largest stock mutual fund, Magellan isn't even the largest fund in its own shop these days.

Once the picture of the kind of performance that active management could deliver, Magellan is the poster child for why many investors feel strongly about indexing.

So while investors searched for message, meaning and hope in Monday's management changes, the real story is why a change at the helm at Magellan has gone from big news to legitimate yawn and whether investors should care about what happens next at this once-great fund.

Magellan has been a dinosaur with a reputation built more on past glories than present realities.

"Magellan has more historical significance than it has current relevance," says Don Phillips, managing director at fund research firm Morningstar.

Magellan built its reputation on great stock picking. Company Chairman Ned Johnson cut his teeth at the fund and clearly delivered the best performance of anyone to skipper Magellan, the legendary Peter Lynch included.

But Lynch got the job because he was Fidelity's best stock picker; when his successor, Morris Smith, left after a short tenure, the firm again turned to its best stock picker, Jeff Vinik, to run Magellan.

Vinik's tenure was marred by a decision to move into bonds. It wasn't the wrong call — it was just early — but industry watchers hammered Vinik and Fidelity for declining returns.

They didn't care that it was the manager's best judgment, they only cared that losses occurred because the manager left Magellan's normal investment zone.

Stansky was not necessarily Fidelity's best stock-picker when he took over from Vinik (that title arguably goes to Will Danoff, manager of Contrafund; Fidelity watchers agree Monday's news would have been much bigger had it been Danoff who was calling it quits).

What he learned from watching Vinik was what not to do in his new job. Specifically, he never varied from the script; he managed by a playbook that seemed destined to make Magellan perform no better than the Standard & Poor's 500 index.

When Stansky took the job, he insisted he would be able to beat the benchmark. He said Magellan's size didn't matter and wouldn't stop him.

Now Magellan shareholders get Harry Lange, who is a very good manager by any measure. He most likely will come in and shake things up (which could have some tax consequences for Magellan shareholders); he almost certainly will not play things as safely as Stansky, though he won't be allowed to mess things up at the firm's flagship.

He won't be moving the fund into bonds any time soon, and performance is likely to remain fairly close to the S&P 500.

Chuck Jaffe is senior columnist at CBS Marketwatch. He can be reached at jaffe@marketwatch.com or Box 70, Cohasset, MA 02025-0070.