Why are people using ROE as a metric in a funds management business. Its main earning asset is FUM and this doesn't show on the balance sheet. Its not like a bank where loans go on the assets page and those loans earn profit, thus a ROE of a bank can actually provide an indicator of efficiency.
I would argue the real ROE is the net profit against the average FUM for the year. And this will be no more than 2%
ROE is not a metric that should be used for Magellan, or any FM business.
MFG Fair Value, page-143
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