MFG (ASX) Ann: Funds Under Management Update

Originally posted by Jean Luc Bergman ↑

The difference is that ARK absolutely *crushed* the broader market in risk on periods. The broader MFG business model has always been value picking to achieve outperformance of 2-3%. This is a great business model if you can do this consistently, but the blunders of a high cash position when interest rates tanked and the market rallied along with China stocks blunders has created permanent capital loss in a year underperformance was close to 20%.

Same with something like Bitcoin, periods of large underperformance and large outperformance but over the long term *massive* outperformance in comparison to the market. Magellan was always marginal outperformance and now after fees quite serious underperformance over the long term. Totally unacceptable from an actively managed fund in my opinion. Toss 90% of your portfolio into index funds and 10% in a leveraged index fund like UPRO and the reality is Mr. Market is going to crush virtually any managed fund you can name over a ten year period. Either you're invested in a genius like Jim Simmons as an example or the value proposition of a fund like Magellan becomes incredibly murky.

And lets be clear, the advertised benefit of an active fund is that during high risk periods they will better allocate funds safely. Coronavirus was the risk event of the past decade and they underperformed by close to 20%.

In other words, a decade of their business model for both themselves and their fund holders was shown to have zero value. After fees the holders went from comfortably ahead to to well behind over the long term, and short term holders were destroyed. This also wasn't stock specific timing issue, this was money being in cash or poor positions like Alibaba such that the alpha is permanently eliminated.

I had skin in the game at $35 and at that point it was already clear through basic Google searches and glances at their website that underperformance was at levels of 15% and therefore a decade of outperformance had been wiped. People like you whether smart or stupid are emotional investors and you've become emotionally attached to a corporate entity that ultimate doesn't care about you the way you care about it.

To be blunt, people like you need to cut the shit about Magellan as a value stock. If they can't outperform the market there business model has a value of about $0. Debt free? Lovely. Profitable? Nice. Low expenses? Great.

Can't outperform the market? Sorry, you don't have a managed fund business. And whether or not they can is gambling, they haven't shown any evidence of achieving such recently and if they don't you're going to lose all the money you've invested. A lot of "non-holders" like myself WERE HOLDERS until the business decided to start increasing cash positions as interest rates lowered and buying stocks in a non-transparent genocidal dictatorship. But I'm smart enough to acknowledge those mistakes are unforgivable the business can prove stable outperformance.

Expand

I re-entered Magellan back in December at $21.50 but bailed out a few weeks ago at $18.50 plus a fully franked dividend with a net loss of about $1.45 per share.

You cannot win against the tide of FUM flowing out and I had mistakenly believed it had stopped but it hadn’t and I will not be surprised if further FUM flows out in the next few reporting months.

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(20min delay)
Last $9.78		Change -0.070(0.71%)		Mkt cap ! $1.780B

Open	High	Low	Value	Volume
$9.81	$9.89	$9.74	$379.7K	38.79K

Ann: Funds Under Management Update, page-101

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