Chapter 215: I'm Not Divorcing This Year

"More accurately, if we can maintain this year's performance into the next year, then I will have completed the transformation of Magellan Fund from negative growth to positive growth. That would give us the capital to open up to the public. Otherwise, with a fund that's consistently losing money, even if we open it up, who would dare to invest with us, right?"

Peter Lynch chuckled, pointing out the flaws in Carter's statement. Just like Carter, Peter Lynch suddenly realized a blind spot.

"Wait, you don't know the situation of the Magellan Fund?"

"Well, not really. But I trust in your abilities, Mr. Lynch!"

Carter felt a bit embarrassed. Last year, he decided to invest in the Magellan Fund based purely on hearsay from a friend in his previous life. He really had no idea about the specifics of the fund.

Compared to last year, Carter felt like a completely different person this year. Back then, he was in the midst of his inflated ego, even going as far as instigating Chen Shuzhen to directly retaliate, something he wouldn't do now.

Let alone investing in a fund like Magellan, which he heard was exceptional in his previous life. Why bother with investigations when there was such a reputed fund available?

"You're right about that. Should I thank you for your trust or make fun of you? I always thought you had thoroughly researched us, especially considering your $1.5 million investment last year, which was the largest individual investment in the Magellan Fund in the past decade."

Peter Lynch shook his head with a wry smile. Carter suddenly understood why Peter Lynch remembered him immediately after Julian's phone call this year.

He was the largest investor in the Magellan Fund, without even realizing it. That was quite unbelievable!

"Here's the coffee, give it a try while I tell you a bit about us. In 1976, the Magellan Fund, originally valued at $20 million, was performing poorly and its assets had shrunk to $6 million. That same year, it merged with another underperforming fund under Fidelity, the Essex Fund, with a combined total of $18 million."

Peter reminisced with a touch of bitterness as he pushed the freshly brewed coffee towards Carter. He continued, "The Essex Fund used to be even more successful than Magellan, managing assets that exceeded $100 million at its peak. It, too, shrunk to $12 million. So, the Magellan we have now is essentially the merger of two underperforming funds. With funds in such dire straits, what's the point of pushing them to the market? Who would dare to buy into a fund that's performing so poorly?"

Carter scratched his head, suspecting that Peter Lynch was indirectly calling him foolish, but he had no evidence.

"During my first year with Magellan, it was quite busy. We needed to restructure the assets, getting rid of Sullivan's unsuitable stock picks and replacing them with stocks I approved. After a year, the results were good, and the assets stabilized. So, I've been relatively idle until now."

"At Mr. Rogers' dinner party last year, I was also considering your future. Who would have thought that you would come to me right afterwards? Honestly, I was ecstatic at that time! I even considered opening up Magellan Fund early because I believed there were people who could see the value of Magellan. But then, when you mentioned it... Ah, I was so disappointed!"

"I'm sorry to hear that," Carter replied with a helpless expression. He had no idea about the heartbreaking history of the Magellan Fund.

The old Magellan Fund, from $20 million to $6 million, a 70% loss; and the once successful Essex Fund, from $100 million to $12 million, an 88% loss.

With such losses, it was no wonder they didn't open up to the public. Following Peter Lynch's narrative, Carter roughly reconstructed the past events.

Peter Lynch, having just completed the restructuring of the fund's assets, looked at this fund, which couldn't attract public funds for expansion, with a lack of concern. So, this young fund manager began a life of socializing at gatherings, building connections, and gathering information, while also scouting potential investors for the future.

And then, there was Carter, with a youthful face but a hefty sum of money, who bounced into his life with $1.5 million to invest.

In such circumstances, even if the Magellan Fund had started to make profits, and even achieved a 20% profit amidst a market downturn of 17%, it still didn't prove anything. Or rather, this small achievement couldn't restore the confidence of the investors who had been lost.

"What do you think if I distribute 20% this year and use the rest to expand investments?" Peter Lynch asked, looking at Carter's despondent face and his self-doubt.

Carter, who had snapped out of his thoughts, suddenly realized the significance of Peter Lynch's question. If he wasn't satisfied, and decided to redeem his $1.5 million, plus the profit, it would immediately decrease Peter Lynch's fund by 7%.

It was a bit scary. To retain Carter, Peter Lynch was prepared to increase the distribution. Even if it meant distributing more, it was better than losing almost a tenth of his fund's total capital in one go.

"20%? I remember the management fee is 0.6%, right? And then there are the transaction fees..."

Carter recalled the investment agreement he had signed. Due to the poor performance of the Magellan Fund in the past, its management fee was actually very low, far from the industry average of 2%.

"Yes, it's 0.6% + 1.2% + 20%. The management fee is $9,000, transaction fees are $1,800, and with a profit share of $30,000, you'll receive $109,200 before tax."

Peter Lynch quickly calculated the profit for Carter. But this profit...

"Forget it, receiving $100,000 doesn't make much sense. I won't distribute this year, and let you continue to grow it. Besides, it'll save me some tax money."