Closed To New Accounts

One of the first NY Times best-selling books about stock investing in the last several decades was One Up on Wall Street by Peter Lynch. During his 1977-1990 tenure as head of Fidelity’s Magellan Fund, Lynch grew its assets under management from $19 million to $14 billion. He averaged 29-30% annual return during this time, which made him the king of the proverbial “800-pound gorilla” on Wall Street.

After Lynch left, Bob Stansky took over, and Magellan grew further to $20 billion AUM, and decided to close the fund to new accounts in 1997. Fidelity had decided that Magellan had grown too large to successfully continue to beat the market, and could no longer make the agile moves under the radar in the market without tipping its hand, due to the ponderous positions it was taking.

Although it was closed to new accounts and was thus no longer taking in fresh investor money, Magellan continued to invest on behalf of its shareholders. The banking crisis of 2008 leveled many funds, and Magellan took hits as well. In 2008, Magellan reopened to new accounts.

Don’t for a second think that this is a regular occurence. Wall Street never turns down money unless the attached cost is perceived to be too high. Politicians, on the other hand, don’t care, since their own money is almost never at risk, so they are hardly ever closed to new accounts.