The Magellan Financial Group Ltd (ASX: MFG) share price is up after providing its monthly FUM update and FY21 performance fees.
Magellan’s June 21 FUM update
The fund manager revealed that in the quarter to 30 June 2021, its total funds under management (FUM) increased from $106 billion to $113.9 billion
That total FUM saw quarterly growth of retail FUM by $1.9 billion to $30.9 billion and institutional FUM growth of $6 billion to $83 billion.
For the June quarter, Magellan saw net outflows of $351 million, which comprised net retail outflows of $260 million and net institutional outflows of $91 million.
Magellan’s funds will pay distributions (net of reinvestment) of approximately $438 million in July, which will be reflected in the FUM figures next month.
Magellan FY21 performance fees
The fund manager is entitled to estimated performance fees of approximately $30 million for the 2021 financial year.
Magellan always points out that performance fees can fluctuate significantly from period to period. It depends how well its portfolios do in that year. Share price movements can be very unpredictable and certainly don’t always go up. Even strong performers won’t always do well every single year.
Average FY21 FUM
Magellan was also provide an indication of its underlying management business profitability. Average FUM for FY21 was $103.7 billion. That was an increase from $95.5 billion in FY20.
Assuming similar margins as FY20, that suggests that Magellan’s underlying management profit will be up close to 10% in FY21.
Is the Magellan share price an opportunity to think about?
I’ve been writing about Magellan as a dividend idea for the last few months. Pleasingly, the Magellan share price has jumped above $54 in July. So it’s not as good of an opportunity as it was in the first half of the 2021 calendar year.
I still believe that Magellan has a good long-term future if it can continue growing its FUM. Funds management is a very profitable business when you reach the size of Magellan. It doesn’t cost much more to manage an extra $1 billion, mostly adding to profit.
Magellan is also making compelling investments into external businesses such as Barrenjoey that have plenty of growth potential. The new retirement product called FuturePay could also grow FUM further.
It’s one of the ASX dividend shares I’ve got my eyes on, though I’d prefer to buy more shares at a price under $50.
