Defying gravity with a one-year 51% gain to $18.583 billion in defined contribution assets, Fidelity Magellan was the star among Pensions & Investments' ranking of mutual funds most used by defined contribution plans.
Among other top gainers in the year ended Dec. 31 were Twentieth Century Ultra, Vanguard Bond Index and Fidelity Asset Manager.
But the biggest star - in more ways than one - was Fidelity Magellan, which already was enormous with $12.316 billion in defined contribution assets as of Dec. 31, 1993. Now, at $18.583 billion, defined contribution assets comprise more than half of the fund's $35 billion in total assets, according to Bob Reynolds, president of Fidelity Institutional Retirement Services Co., Boston.
"The percentage of retirement assets at the Fidelity organization has become more meaningful. These assets are earmarked for longer term investments. It's helpful from the portfolio manager's side. It means pretty dependable cash flow and excellent stability," Mr. Reynolds.
Vanguard Windsor ranked second among equity funds most used by defined contribution plans, with $4.762 billion, a gain of 7.4% from its total of $4.433 billion in defined contribution assets in last year's survey.
Vanguard's two passive stock funds, Index Trust 500 and Institutional Index, together totaled $5.123 billion, a rise of 14.8% from the year-earlier period, when the assets of both funds were combined in the Index Trust 500 total of $4.462 billion. Virtually all of the gain was from new accounts or additional contributions, because the Standard & Poor's 500 Stock Index was up only 1.3% during the period.
In fixed income, the top three funds last year maintained their standing. Two of the funds - top ranked GE S&S Long Term Interest and GE S&S Short Term Interest - are part of the GE 401(k) program for the General Electric Co.'s 170,000 active employees. Assets of the Long Term fund declined 11.5% to $2.807 billion. "It may just reflect some changes in asset allocation. Employees may have moved in and out of different vehicles," such as other GE funds or company stock, said Janet Hengelbrok, director of communications.
Ranked No. 2 was Fidelity Intermediate, with $1.434 billion, a healthy increase of 37.4% from $1.043 billion the prior year.
Vanguard's Bond Index Fund-Total Bond came into its own among defined contribution plans in 1994, following the surge in popularity of the fund among retail investors in the past two years, according to William McNabb, senior vice president. Defined contribution assets in the fund climbed 39.5% to $600 million from $430 million in one of the worst periods ever for bond returns. That put the fund in fifth place. In 1994's survey, it ranked 13th.
"In the defined contribution world, very many plan sponsors wanted to offer generic asset class options. What better way to do it than an index - even if their bent was toward active management," Mr. McNabb said. He said the Vanguard portfolio outperformed 88% of the 1,485 fixed-income funds tracked by Lipper Analytical Services Inc., Summit, N.J., in the five years ended Dec. 31. This makes a compelling case for indexing on the bond side, he noted.
"The main reason indexing works is probably cost. It's a very cheap way to run bonds," he said.
Likewise, in equities, the S&P 500 outperformed more than 73% of active managers in 1994, "which was supposed to be a stock-picker's market. It surprised a lot of people," Mr. McNabb said.
Fidelity Asset Manager, a newcomer to the rankings, placed in the top 10, with $2.878 billion. It joins four other Fidelity stock funds in the top 10 including Equity Income and Growth and Income.
"The most popular funds do attract DC assets. A lot are almost household names," Mr. Reynolds said.
Asset Manager is the oldest of Fidelity's lifestyle asset allocation funds and lies between its two peers in the middle of the risk spectrum. "It's been a 401(k) plan option since 1989. With the popularity among plan sponsors of lifestyle funds, the whole Asset Manager family has been popular among defined contribution plan sponsors," Mr. Reynolds said.
