MFG Fair Value, page-136

Keep up the good work, KGB.

I’ve used the Simmons method, as expoused in RM’s book, as it makes logical sense but obviously while the maths are compelling, changes in the inputs (e.g.FUM) need to be considered. For a fund manager, a range of potential performance outcomes is easy to calculate, however a risk analysis needs to include a consideration of loss in FUM compounding adverse performance periods and how that might extrapolate into future years.

I’ve found that this formula spits out fairly conservative valuations relative to the share prices of ASX-listed stocks, even prior to all the stimulus!

Unfortunately, Manager stocks, despite being high margin businesses, tend to have high payout ratios. A Trust structure such as MFG returns net profits to investors as distributions compulsorily each year. Secondly, if the investment team have substantial proportions of their wealth tied up in their products then they may rely on dividends/distributions to live on (yes, it must be tough having so much money ) although they may be entitled to a salary, bonuses and options as well.

By the way, did you do some sort of off-market transfer over this long weekend? I notice you’ve changed from Sell/Not held to Buy/Held

cutty, as for the performance of RM’s funds, also there’s selection/survivorship bias as his former wonder child’s global fund was ditched after several years of lacklustre performance with the launch of a new offering that bears the M branding despite apparently being independently run by an external foreign financial institution, from which I inferred that they may believe someone else’s technique is better than their own.

I’m fortunate to have redeemed my holdings in their Master Funds (Private Fund and Montaka Fund) in December 2019 and January 2020.

I did consider their small cap fund, which was doing okay last time I checked (run by a pair of analysts who if I remember correctly already had been managing a different small cap fund together, but who then joined the M branding as a JV, presumably their ideas but under the M logo for marketing to attract FUM), but I’m happy enough with my existing small cap funds.