All-in on passive investing is all wrong, says former Fidelity Magellan fund manager

[BOSTON] Peter Lynch has a word for people who have gone all-in on passive investing: You're losing out.

"The move to passive is a mistake," the former Fidelity Magellan fund manager said in an interview with Bloomberg Radio's Baystate Business. "Our active guys have beat the market for 10, 20, 30 years, and I think they'll keep on doing it."

As proof, he cited 3 current Fidelity managers: Steve Wymer of the Growth Company fund, Will Danoff of the Contrafund and Joel Tillinghast, who is planning to retire from the Low-Priced Stock fund.

Those mutual funds are among Fidelity's most popular, thanks to the stock-picking prowess of the 3 men - a skill that made Lynch, 77, famous and his investors rich. In his 13 years at Magellan, he produced an annualised return of 29 per cent.

Lynch, who increased Magellan's assets under management from US$14 million to US$18 billion, made his remarks in an interview about his latest gift to his alma mater, Boston College.

The money manager is donating 27 paintings and 3 drawings - worth more than US$20 million - from his and his late wife Carolyn's private art collection to Boston College's McMullen Museum of Art, said a statement from the school.

The collection includes works by Pablo Picasso, Winslow Homer, John Singer Sargent and Mary Cassatt. Lynch said his interest in collecting began at a young age with baseball cards and stamps.

"All students definitely can learn from this collection, which includes a diversity of styles of painting, many of which depict the natural beauty of our country from its most celebrated painters," Lynch, a 1965 graduate of Boston College, said in the statement.

The donation also includes US$5 million for the ongoing curation of what will be called the Carolyn A and Peter S Lynch Collection. Boston College said the total gift is one of the largest in its history. The exhibition should be ready for viewing by September, Lynch said.

Aside from his art collection, Lynch works part-time as vice-chairman of Fidelity Management & Research Co, mentors young analysts and focuses on his philanthropy, including giving through the Lynch Foundation. He retired from Fidelity in 1990 at age 46.

Lynch is not focused on the fund-management business - or whether a stock-picker is likely to beat his record returns.

"I don't keep score," he said. "I've got 10 grandchildren - just had No 10 6 weeks ago. That's what I keep score on."

BLOOMBERG