Glaucus Response, page-6

Minus the vitriol, the rebuttal raises some fair points.

The whole definition of AUM is a bit of a smoke screen, imo - the company should be valued based on sustainable earnings. The issue, quite simply, is that BLA is over-earning relative to its AUM at the moment due to two things:

1) Its base management fees are unsustainably high (albeit they've come down substantially over the last few years) - in the last 12 months they earned $53.6m from management fees + profits from associates (US JVs), on an average $3.3bn AUM (opening $2.7bn, closing $3.9bn). That pencils to ~1.6% gross AUM base fee load. That is too high - my guess is, over time, this will settle closer to 1%, particularly as institutional capital becomes a bigger % of total AUM. I suspect the 1.6% BLA is earning at the moment is partly driven by significant fees in the retail segment that aren't really 'management fees' as i'd understand them.

2) Performance fees at the moment are higher than i'd expect through the cycle - they generated $23m performance fees over the last 12 months, but if i assume they manage $4bn AUM, earn a 14% pre-fee levered return on average, charge a 1% AUM base fee, and clip 20% over an 8% return, the performance fee is more like $18m.

Add those two together, and i'd say they're currently over-earning by about $20-25m at an EBIT level relative to where i think they'll get to as they mature and go through a cycle.

The stock price reaction is pretty typical in the circumstances when you have a company who, 2 weeks ago, everyone thought was sustainably earning say $100 and deserved a 25x multiple, and now i suspect people have figured out that a fairer/normalised earnings number is more like $70 and a fairer multiple might be 16-18x. That's a ~50% share price fall right there, which is roughly how things are panning out.