Hi @asxunsulliedIt is important to note this isn't aimed at...

Hi @asxunsullied

It is important to note this isn't aimed at being advice and you should seek qualified independent opinions before making a decision.

If I were to invest in Magellan shares, the price paid would be with the following considerations:
1> Apply a Margin of Safety on Liquidation Value. I would apply a 30% discount to Liquidation value (whatever outcome of discussion with others on this thread). I am tipping Liquidation Value to be $6 at the moment, but could lower until business demonstrates it is stable.
2> When FUM stabilises (or is growing marginally again), look to the PE Ratio being at between 7 and 8 times forecast annualised earnings based on historical margins. This is likely to come with a management fee reduction. If they haven't reduced fees and the business turns around, it will be a miracle and David George should be known as the next Messiah.
3> FUM performance would need to be at least 10% greater than indexes and peers per month. A couple of other ASX listed Fund Managers are performing at this level and is the benchmark for Magellan. These ASX listed fund managers aren't invested in just shares, they manage funds in other asset classes too.
4> Have sold its non-core assets in Note 8 of Annual Report. A greater focus on Funds Management is key to survival and future performance. This will change the Liquidation Value scenario, however it ensures Magellan's Fund Management business is the focus moving forward (Burn the boats and they will fight to survive with greater vigour). Investment Banking may be in the doldrums for a couple of years now after a high activity year across the industry in 2021.

There are some scenarios that may come about that would disqualify this, like a takeover offer. Based on Regal's offer for Perpetual, a potential takeover offer is not likely to get much more than $5.50 per share at the moment (circa $1 Billion valuation). Perpetual and Magellan are different businesses so valuation can't be directly correlated.

Other risky trades I would not do for Magellan:
- Average down position. Until the business is achieving success, there is a high risk of loss of capital.
- Take advantage of the volatility and trade. This just isn't for me for this asset, others may have a different opinion. As Magellan hasn't turned around its business yet, best to avoid any potential downside risks.

In terms of the debate on ETF's versus Active Fund Managers, I believe there will always be a place for Active Fund Managers in the industry. I like investing in early stage Active Fund Managers as there can be significant upside (also downside, limited by low initial investment). My investment focus is more on the US market these days.

The question is will Magellan suffer as a result. I see Magellan more like an Index than an Active Fund Manager. They are very slow to rotate losers out and returns correlate to markets (be it they are under-performing indexes at the moment). They are overweight technology index which is why they are under performing. If the Tech Indexes start to turn then Magellan's performance could naturally increase slightly - I don't believe this will happen any time soon.

I'll leave it at that for now.

Best of Luck
Lost