The Magellan Financial Group Ltd (ASX: MFG) share price has substantially beaten the share price of Perpetual Limited (ASX: PPT) over many time periods.
Magellan is a funds management business that largely invests in international shares like Facebook and Visa. It was set up in 2006 by Hamish Douglass and Chris Mackay. Since inception, Magellan claims it has been one of the most consistent market outperformers after fees.
Two Diverging Performances
Over the past year the Magellan share price has gone up 137%, whilst the Perpetual share price has fallen 12%. Over the past five years the Perpetual share price has dropped 18.5% whilst the Magellan share price has risen 412%.
I think there are two reasons for the share price changes.
Fund Under Management (FUM) growth
Magellan has been able to grow its funds under management (FUM) strongly over the years, which has significantly increased its management fees. At the end of June 2019 Magellan had FUM of $86.7 billion, compared to $59 billion at 30 June 2018 and $23.5 billion at June 2014. More FUM means more management fees for Magellan.
Meanwhile, Perpetual had $27.1 billion at 30 June 2019, $30.8 billion at 30 June 2018 and $29.8 billion at 30 June 2014.
As you can see Magellan’s FUM has risen strongly and Perpetual’s has fallen over the five years.
Fund Performance
I believe the reason why Magellan has attracted so much FUM over the years is the strong performance of its funds.
Over the past 10 years the key Magellan Global Fund has returned 16.28% per year and the Magellan Infrastructure Fund has returned 15.51% per year. You can see why investors would be attracted to this performance.
Meanwhile, the Perpetual Wholesale International Share Fund has returned an average of 10.76% per year over 10 years and the Perpetual Wholesale Australian Share Fund has returned an average of 9.72% per year. Whilst these numbers aren’t bad, Magellan’s are clearly more alluring.
Is Magellan A Buy?
The Magellan share price has performed so strongly that it might be a bit too expensive to buy today. However, I think I’d rather buy its shares over Perpetual today.
But the quality businesses in the free report below could be even better ideas to choose.
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