The Magellan Financial Group Ltd (ASX: MFG) share price is down after the fund manager gave its monthly FUM update for February 2021.
What did Magellan announce for February 2021?
Magellan said that at 26 February 2021, its funds under management (FUM) rose by $200 million to $100.6 billion. That was despite the Australian dollar strengthening by close to 1 cent compared to the US dollar, over the month.
The fund manager said that in February, it experienced net inflows of $691 million, which included net retail inflows of $703 million and net institutional outflows of $12 million. These numbers include the Magellan Global Fund (ASX: MGF) partnership offer with applications of $726 million announced to the market on 25 February 2021.
The global equities strategies saw an increase of around $110 million, a $160 million reduction for infrastructure equities and a $60 million increase in Australian equities.
It seems that without that partnership offer, FUM would have seen an outflow.
I think the Magellan share price is a buy
The Magellan share price has suffered in the wake of this inflation/interest rate sell off. It has dropped over 30% since 20 November 2020.
Some of Magellan’s investments haven’t grown recently, but this is a very short term horizon in investment terms. The Australian dollar has continued to strengthen against the US dollar, but there’s a chance that this could reverse if the US economy strengthens on the COVID-19 vaccine rollout. There also appears to be continuing delays with its retirement product.
However, there are also a number of attractive features about Magellan. It continues to see FUM inflows, into products that attract a high level of management fees.
Magellan’s new investments – Guzman y Gomez, Barrenjoey and FinClear – are all doing well. If you read the Australian Financial Review you might have seen that Barrenjoey seems to pinch a quality individual from other local investment banks at least once a week.
Another reason to think that Magellan can be a solid performer is that it has a high dividend payout ratio. Fund managers don’t need to keep much capital to grow, so Magellan can pay large dividends to investors – this adds to the total shareholder return, without impacting growth much.
Magellan currently has a trailing partially franked dividend yield of 5.1%. Using earnings estimates on Commsec, it’s valued at under 14 times the projected earnings for the 2023 financial year.
