Agree with pretty much everything you've said there Plague. One of Magellan's strengths in FUM gathering over the years has been it's horde of highly paid and highly incentivised Salespeople. Once the tide turns and these folk begin scattering to hungry competitors determined to feed on the vast FUM carcass of Magellan, what do these same salespeople tend to do? They usually turn around and use the relationships and knowledge they have to try to poach business for their new employers and that's when the stories tend to come out about any deterioration of culture, bad behaviour, questionable investment calls etc. So the former asset then becomes a liability...and you can't really blame them after all, these guys and girls have expensive lifestyles to maintain...private school fees, prestige car payments, mistresses etc
You're right though, MFG will definitely survive and Mackay may even be able to turn them around over time, but as you've pointed out, they have to generate outperformance (not guaranteed) and also re-price their back book of FUM to stop the continued outflows, and they aren't willing to do that last part, so they may have to find a pathway to "shrink to greatness" somehow by maintaining the high fees with the stickiest FUM and reducing costs within the business or have some good luck with making some killer investments on their own balance sheet. I always thought Mackay was going to try and grow MFF into a mini Berkshire Hathaway with direct investments when he first left Magellan's mothership, but he didn't go down that path...maybe this will be his second chance to try that angle.
It will certainly be fascinating to watch how everything plays out over the next few years, but I think the share price goes lower first.
MFG Price at posting:
$18.12 Sentiment: Sell Disclosure: Not Held
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