If you feel basing your investment simply on the strength of their balance sheet is all you need then that's a very narrow-minded approach.
You obviously know or should know that the success of an investment is based on many factors, not just the balance sheet in isolation.
The problem with Magellan is that its balance sheet is strong now, however, the profits that fuel that balance sheet are very rapidly diminishing. The risk is will that balance sheet remain strong later?
I mean, I have $200,000 of cash sitting in my offset account and an income of $80,000/year. Looks all rosy on paper, but if I go to jail or get fired and have to take a job that pays me, say, $30,000 a year with the cost of living going up, with mortgage rates going up, suddenly that cash is going to get eaten away quickly and I'll go broke eventually.
Magellan employs investment staff on extremely high base salaries, pays large bonuses, holds expensive events, flies their investment personnel on first-class around the world for "company visits", has regulatory and marketing costs etc. Those costs were manageable when their FUM reached critical mass, but when their FUM collapses obviously their operating ratio is going to weaken substantially and then he balance sheet is going to look pretty soft.
I've been monitoring the performance of their infra fund and even the alpha that's generating against the benchmark and even that's waning.
The risk now is that infra mandates are lost and then two of their three legs in the Magellan stool are broken.
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