Ann: Funds Under Management - November 2021, page-121

Bull case for Magellan
- Performance turns around, magellan slows outflows and eventually returns to inflows.
- Sustainable fund winning mandates.
- Airlie funds management have outperformed and are attracting more capital.
- Magellan capital partners are in profit and potential to contribute meaningfully going forward.
- Issues are already in the price, dividend is attractive.

Bear case for Magellan
- Global fund poor performance continues leading to more outflows, Magellan brand tarnished from the media and governance issues.
- Poor handling of CEO exit, vague reasoning, no further explanation, leaving immediately with no transition period.
- Poor respect to shareholders disclosing important details that would affect Magellan to the media before the shareholders (Potential for class action lawsuit)
- Changing in reporting flows from monthly to quarterly (This change coincided with a change from inflows to outflows June 2021).Why is this important ? Reducing transparency and disclosure to an important part of the business.
-Strange commentary around outflows of 1.5 billion during Sept. quarter. Outflows called 'rebalancing' Why does rebalancing have to be negative?
- Denial of outflows “I haven’t found an institutional investor who has questioned the performance over the last 12 months,” says Douglass, Interview in Sydney Morning Herald Dec. 4. 2021
- Cutting fees of Global fund by 50 basis points (Haircut of 30%, no performance fee going forward for a selective group of wealth managers).
-Dividend isn't sustainable if outflows increase to > $3 billion per quarter (Signs that this has already occurred even before this governance issue). Data shows advisors are already heading for the door in September and November, this news broke in December What will the quarterly flows look like?
- Building pressure to cut fees for other funds to match more competitive peers.
- Alibaba delisting risk. Failure to protect investors even when news broke of Jack Ma and fines. (Still 3.9% of global portfolio even after the last move downwards).
- St James place had put magellan on 'Amber' From Jarden, "Magellan's relative strategy performance has triggered a downgrade to "amber" under St James' traffic light system, Jarden reveals, on a total funds under management basis, St James represents about 18 per cent." This was in September, relative performance has continued to lag the benchmark since.



I admit I got this one wrong. The ability to change your mind is the hallmark of a great investor (Not saying I am one.) I should of questioned the change in reporting more and left when the flows changed. Although I have liquidated ~ 95% of my holding I remain a shareholder and if magellan can prove itself again I will have another look. If you have anything to add to either case please do.

Magellan was a great business with fantastic returns, strong inflows and a healthy culture. When the facts change you need to adapt, not sit on your hands. You don't have to make your money back the same way you lost it. This is my personal opinion, not investment advice.

Cheers,
Plague