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We Need to Talk about Magellan

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Shock, horror. The horror being the last 18-months, a period in which there was a (blind??) endeavour to repeat the downside mitigation moves Magellan made in the GFC and set its history . . .  to recent date. It was these moves that made Magellan – going into cash.

Fast forward circa 20+ years – “Don’t fight the Fed” – the memo that almost every investment manager had  read. Now, the move into cash in March-April 2020, one would well understand. Regal did the same thing. But as April 2020 rolled through, Regal (ever responsive) realised a dynamic was in play – they went aggressively long, and the rest is history.

The issue with Magellan, to cut to the chase, is an issue of a strong leader / not having a flat democratic structure. In my humble opinion. But i have reviewed many a fund manager. The very launch of a 10-12 stock portfolio (MHH), highly concentrated not only but stock, but by geography (US), Sector (tech), factor (growth) valuation metric (exceptionally high P/E), and by very high Cross-correlation between the 10-12 stocks. It was a gutsy move from day 1, not that Magellan did not recognise and state that MHH was not designed to be suitable for all investors.

Back in the day, financial advisors almost by default allocated the international equities allocation to either Platinum or Magellan. Those days are gone, and that is no bad thing.