@StockYoda
Although I'm negative on the prospects of MFG I don't think this is a fair nor - more importantly - an accurate comment.
Magellan and Babcock & Brown are two entirely different businesses.
Magellan is a very simple business: It manages clients' funds in global and Australian equity strategies and collects revenue from management and performance fee income. To a lesser extent, it has stakes/ownership in a Mexican restaurant chain and corporate advisory business Barrenjoey, which can pay dividends to Magellan from their earnings. I won't comment on the logic of why MFG put capital into these businesses, but the fact is these are simple businesses. On the balance sheet side, Magellan has no debt. It's not involved in any complicated activities/lending/securitization etc.
Babcock and Brown was one of the most enigmatic businesses on the ASX and was involved in using its own balance sheet to lend to/buy extremely complicated assets including aircraft leases, large swathes of real estate, and infrastructure. No one could understand how it all worked and how it actually made money. It leveraged itself to the hilt and then imploded when lending markets froze and yields soared during the 2008 financial crisis.
It's extremely unfair to say Magellan "tricked" anyone. They provided managed funds which investors/advisers/instos gladly poured ~$100 billion in capital into.
Unfortunately, as an investor you bear the risk of any fund underperformance - that's just the way it goes with any investment.
What I don't think equity investors understand or appreciate is the sheer amount of value destruction that can occur at the company level (MFG) when an entity that is in the business of providing managed fund underperforms the benchmark on a sustained basis and the intricacies in the industry - research houses, adviser groups, institutional mandates, complex sets of relationships between parties, competition from ETFs etc.
Investing in a fund manager is not as simple as investing in a company like Woolworths, which is driven in a very straightforward way: population growth and rising consumption linked to rising incomes. Or Visa: growing usage of credit cards and cashless payments. The CEO could be a twat - but they won't stop the underlying business from growing.
Unfortunately, there are just too many complexities when it comes to listed fund managers.
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