Peter Lynch is a legend in the investment world. If you ask investors to name America's all-time best money managers, Warren Buffett would no doubt come out on top. But chances are Peter Lynch would be close behind.
Lynch managed Fidelity's Magellan fund for 13 years. Under his watch, assets under management ballooned to $14 billion. He authored several books on investing and coined the term "ten-bagger," which describes a stock that goes up 10 times in value. He was famous for walking around shopping malls and paying attention to what people were buying. Today, he spends a great deal of time on philanthropy.
Yet the man who is so revered by investors, stands a little tarnished. You see, Lynch accepted gifts from brokerage firms that were seeking Fidelity's business. This is considered a big no-no in the mutual fund industry because gifts from brokers might be construed as bribes. A manager who accepts a gift might feel pressured to channel business in that broker's direction.
Because Lynch managed so much money, you might expect to find that it took hundreds of thousands of dollars in bribes to buy his business. You would be wrong. What is the value of all the gifts Lynch received? A grand total of $15,948! The man who managed billions of dollars on behalf of investors all over the world got into trouble for accepting $15,948 worth of tickets to sporting events and a rock concert. He didn't even use many of the tickets he received.
I have no doubt that Peter Lynch is a man of integrity--an honest man of high ethical standards. Obviously, he would have been smarter not accepting any gifts whatsoever. But there is absolutely no evidence that Magellan shareholders were harmed in any way. On the contrary, Mr. Lynch delivered outstanding market-beating returns to his investors. In my view, if a man like Lynch can get into trouble for something like this, there is something wrong with the system. The government barked up the wrong tree in this case. My respect for Mr. Lynch has not been diminished in the least.