Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

Magellan (ASX:MFG) share price sinks as global equities FUM falls 50%

The Magellan Financial Group Ltd (ASX: MFG) share price will be under more pressure today after announcing a further $6.0 billion in client outflows.

This represents a 7.7% decline in total funds under management (FUM) since the last disclosure in February.

Rush to the exit door

Currently, the Magellan share price is down 2.25% to $13.88.

It’s been a race to the exit door for Magellan clients as underperformance plagues the business.

The flagship global equities strategies have now lost more than 50% of its FUM since October, from over $80 billion to now just $39.2 billion.

Subsequently, FUM has sunk 39% to $69.1 billion.

What is the impact on the Magellan share price?

The market has reacted viciously to the outflows, with the Magellan share price down 64% since October.

The reason inflows and outflows are so integral to a fund manager is that it impacts revenue and thus profits.

Magellan earns fees on FUM and records this as revenue.

The average fee Magellan earns is known as the revenue margin.

In the last half, Magellan earned a revenue margin of 62 basis points or 0.62%.

Put another way, for every $1.0 billion of FUM, Magellan earns $6.2 million in revenue.

On the expense side, it has to pay analysts, sales, and support staff to manage operations.

In funds management, costs are largely fixed. More FUM doesn’t correlate to more analysts or support staff, therefore profits can rise quickly.

But the opposite is also true.

When FUM is going out the door, and the cost base remains fixed, profits tumble.

Estimating Magellan’s profit

Using an estimation of second-half FUM in addition to first-half revenue margin and costs, it’s possible to estimate what Magellan’s profit will be.

For clarity, the $77 billion in FUM is an average of six months from January to June.

Magellan second-half profit estimation

The second half profit estimation of $174 million pales in comparison to the first half of $327 million.

Hence why the Magellan share price has come under so much pressure.

If FUM continues to fall over the coming months, expect the profit before tax to keep falling.

In fact, based on the above assumptions, every $1 billion Magellan loses in FUM results in a $3 million hit to the profit line.

Readers should note this is only an estimation. Changes in expenses, performance fees, market movements, and margins will all impact the actual result.

Nevertheless, it’s clear the outflows are having an outsized impact on Magellan’s bottom line.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Lachlan does not have a financial or commercial interest in any of the companies or funds mentioned.
Skip to content