MFG Fair Value, page-105

The obvious issue MFG is facing is underperformance to the indexes and as a result withdrawal of FUM. SJM 21B is a big hit to EPS dropping to A$1.80 to 2.00 range after allowing for management fee reduction on retail funds of 30B too. I am assuming the left over institutional funds averaging 2 to 3 B each can be replaced even if they loose one or two. These funds were expecting 9% returns and they received 12%, most will stay.
Can the MFG portfolio performed as well as the indexes. In my opinion it is definitely yes under normal growth of GDP and normalised interest environment.
Past year annual underperformance has been gradually
receding from 25% to 14% without any of the tapering and increased interest rates taking place. It is a long wait but definitely happening unless something like omicron derail it again.
Hamish and his team including from Barrenjoey will have to find other means of increasing FUM to fill the gap left behind by SJP. There about 4 or 5 very dynamic corporate executives in the Australian corporate world in that team including David Gonski in that group of companies. For good governance Hamish needs to invite
high powered executives to get rid of key man tag.

Some kind of merger between the two as well as any other wealth management merger will help the course. For all those in hindsight experts critical of UBS team moving to Barrenjoey and facing MFG SP dropping from $50 to 20, have a look at UBS performance. At the time of GFC UBS SP was CHF 65 and now 17. Also being critical of MFG investments in China, do some research UBS is in the forefront of the exposure to Evergrand and other Chinese funding. These were supposed to be reasons they left UBS to set up their own business. Like Hamish they are risk takers, not being critical of others from sideline.
It is a long road back for MFG, but realistically finding 20B fund’s investment or equivalent revenue income from other businesses are within the capabilities of MFG and Barrenjoey team in my opinion.
My estimate for MFG underperformance to indexes will be 12% at end of December 21 or less and over next 6 to 12 Months with interest increase and normal setting it will gradually run down. As I said before it is already 50% of the 25% underperformance only about 6 to 9 months without the first tapering or interest increase.This is critical for MFG future attraction as a good fund manager.