Nice post. Just one major flaw with your argument, there isn't any value in Magellan? A business cannot have value or perceptions of increasing value if its core business is structurally challenged and management have not and cannot do anything. Magellan has no "value trigger" per se for any type of turnaround.
I think you maybe don't understand how funds management works.
It's different to, say your TPG example and:
When BHP was trading at <$20 (after hitting $50+). Tremendous value as we knew commodity prices would cyclically and eventually recover while management was extremely aggressive in cost-cutting and focus on top tier projects. A catalyst was being put in place
Woolies trading at ~$20 (after falling from $30+). Tremendously profitable core business troubled by Master's. Bunducci came in, cleaned it up, focussed on what consumers wanted most which was competitive pricing and ditching non-core hotels and pubs etc. Lo and behold.
Macquarie buying Delaware when MQG was trading at ~$50 in 2010 - a master stroke where it bought a prized U.S. asset manager for a rock bottom price AND when the AUD/USD was at parity. This added a re-rating element to a tremendously profitable core business that the market was fearing due to what happened with banks in the GFC.
You will note that in each of these businesses there are a number of key elements:
Tremendous core businesses marked down by Mr. Market
Cauterization of the issue (i.e. disposing of non-core assets, cost-cutting, better communication etc.)
Bold leadership and execution
A well-thought, communicated strategy in place to return and add shareholder value
Magellan has none of these traits. Most worryingly, its "core business" is so enigmatic because it's completely tied to fund performance that there is no possibility of predicting that Magellan will eventually - if ever- do its job which is to generate alpha for unitholders of its products. Barrenjoey's performance just isn't enough to offset the rest of the Magellan ship.
In order to be a great value investor, a value investor must be able to find elements of value creation and weigh the risk of execution in that value being generated.
Your post implies that Magellan will simply magically one day become a value story that will deliver 2-4 bag returns. I'm betting against you it won't (that's not to imply I'm shorting it. I don't. I'm a long-term dividend/growth/property investor). There are no conditions in place for a turnaround of this business. Unlike commodities, it cannot rely on "cyclicality" for outperformance or increased fund flows. There is no plan from the leadership team. It isn't possible to cauterize the issue because Nikki Thomas isn't necessarily a better stock picker than HD - any of her picks can blow up.
On top of this, Magellan with its performance is now locked in the jaws of competition from passive investors. With Woolies, I still have no choice to go to Woolies because it's close to me and stocks great products that I want and offers better service. With Magellan, the choice is completely commoditised and accessibility is a non-issue for retail investors. Why should I hold into MGOC when I can buy IVV? Why should I hold onto MICH when I can buy IFRA or a Vanguard ETF for cheaper? Why should I give any global asset manager my money when I can buy stocks myself and possibly do a better job?
To suggest this business can turn around on the basis of no catalysts being in place is simply whimsical and regardless, there will be no "laughs" even if this business miraculously recovers. The heartache, sleepless nights and losses for many investors have likely been unbearable and should it turn around, yes, a few will win, but many who trusted this company would feel mocked.
(20min delay)