MFG in the BUY zone, page-131

I'll chime in with a few unsolicited thoughts, if I may...

1. The 160m liability you were referring to, I believe, was the cost of funding the global fund restructuring which took place late 2020. It is not related to the recent investments into BJ, GyG etc.

2. The BJ GyG etc investments booked a net loss of 41m as reflected in the income statement. It's just a GAAP requirement and not an actual cash impairment to MFG. Note 9 of the annual report explains this in detail.

And yes, future performance will be attributed to MFG in the form of mark to market valuation of those investments (also GAAP) - I'm not 100% sure of this so would appreciate any corrections.

3. MFG and the global fund are two different types of investments (I hold both in roughly equal proportions though I'm adding more of both due to the attractive valuations currently).

4. The global fund is a pure play equities investment. It trades about 15% below NTA, I believe, because the market has (temporarily) lost confidence in Hamish and his team. Also, don't forget that the other more aggressive funds have significantly outperform the Magellan global fund. For example, see the Hyperion growth fund which trades exactly at NTA, signalling confidence in the management team.

5. I think one needs to really buy into the Magellan/Hamish approach of downside protection if you want to invest in the global fund. By way of illustration, it doesn't hold massively over valued stocks like Tesla or APT which are considered high risk (maybe not so much APT given that it's being acquired by Square). It's because of this conservative downside protection approach that the global fund has underperformed the market and other more aggressive funds in the last 12 months. You need to consider your own investing preference when deciding whether to invest in the global fund or some other non Magellan fund.

6. Back to MFG, approximately 75% of its FUM is held by institutional investors, rather than retail investors like you and me. Institutional investors are known to be short term focused, so there may be short term fluctuations with MFG (and probably the global fund as well). I had previously queried in an earlier post as to how Magellan can continue to grow FUM given that 100++ billion is pretty significant. I think the way forward for MFG is in the external investments we discussed above. There have been earlier posts in HC discussing the future of BJ, which I found useful.

7. Lastly, I don't necessarily think Hamish and his team has lost the touch. Hamish has always been very clear about the strategy and asked to be judged over a 3-5 year span rather than the last 12 months. As I mentioned, you need to be comfortable with this somewhat conservative style and the timeframe.

Very happy to hear further thoughts to facilitate more discussion.

GLTAH