Round of applause for the Magellan board!When all else fails,...

Round of applause for the Magellan board!

When all else fails, let's rely on accounting gimmicks (aka buybacks) to prop up the price of a business whose intrinsic value is rapidly diminishing as FUM falls.

This company is now in such a difficult position: if they cut fees to match ETFs, then those fees would need to be reduced to the point where they're competitive with other ETF providers (e.g. BlackRock and Vanguard charge 10-20bps or even less for their core strategies) otherwise reductions would be for nothing if they are insufficient to build scale. This is obviously a structural and dangerous change to their business model and would likely cause instability among staff and insto investors who pay Magellan to be active.

It continues to baffle - even sicken me - how MFG holders continue to be lulled in by Magellan's misleading marketing around "downside protection" as rightly called out by Joe Aston this week.

This business is undergoing Darwinism as we speak. Their core strategy can't beat the benchmark no matter if it rises or falls - underperformance like this can never be repaired unless Magellan finds a 10-bagger, and even then, that would constitute a change of risk profile of the fund and instos would become even warier about Magellan's strategy.

I expect outflows in the global strategy will pick up momentum and cause collateral damage to their infrastructure and Airlie strategies, and if the latter underperform then the game is well and truly over and Magellan would have to consider a sale or trade like Platinum - a business only sustained by un-engaged investors.

This announcement is yet another red flag among many from Magellan. There is no fundamental change to this business and it will not put a floor on the price when the bears are out for blood.