Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
The Sector has been sold down with intos bailing out withdrawing FUM in the current cycle building cash This has impacted performance. With MFG Magellan, IFL Insignia and PPT Perpetual at close to record lows, and paying high dividends of 7% It would appear to be an ideal time to BUY Performance other than MFG has been affected by merger takeovers which will ensure diversification of product offerings going forward What is your view?
Hi Richard,
We agree that fund managers look particularly cheap in this environment, and we have a preference for the ones with either: Latent value on their balance sheet, or an active approach to improving/evolving their business.
Magellan (MFG): We value their principle investments at close to $6 per share, meaning the funds business is worth ~$1, or in other words, its trading on around 3x earnings. We view this as deep value. We are marginally down on our position, and some believe we are misjudging the reputational damage that has occurred, and we appreciate these views, however in our assessment this is built into the share price.
Perpetual (PPT): We have owned in the past, and their Trust business is the jewel in the crown which provides valuation support & or a reason for a breakup to realise value. Around $20, we like PPT however we run high conviction portfolios, and have a preference for MFG, hence our holding.
Regal Partners (RPL): We own RPL in the Emerging Companies Portfolio, and while we actually view it as reasonably expensive relative to their FUM, they are aggressively building scale and diversification across the strategies they manage with a skew towards alternative strategies. We believe RPL is evolving into a stronger and better operator, with a lot of runway to go.
We are less keen on Platinum (PTM) & Insignia (IFL).
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