The Magellan Financial Group Ltd (ASX: MFG) share price is under the spotlight after announcing its July FUM update.
FUM stands for funds under management, meaning how much money it’s managing for investors.
July FUM update
The fund manager reported that its FUM at 29 July 2022 was $60.2 billion.
This was a reduction of more than $1 billion from the $61.3 billion at 30 June 2022.
While investment performance helped cushion the blow, Magellan pointed out that during July, it experienced net outflows of $2.5 billion. This was made up of net retail outflows of $0.4 billion and net institutional outflows of $2.1 billion.
Magellan has committed to releasing its FUM with its monthly update.
Let’s look at the breakdown of the $60.2 billion.
Retail FUM, that’s funds from investors like you and me, was $22.6 billion.
Institutional FUM, was $36.6 billion.
However, we can also look at how the FUM is split between the different investment strategies.
Global equities had $33 billion of FUM.
Infrastructure equities had $18.9 billion of FUM.
Australian equities had $8.3 billion of FUM.
What does this mean for the Magellan share price?
Clearly it’s not as much of a negative. Magellan is currently up by 2%.
Investors were expecting Magellan to keep seeing FUM outflows. A question is – will the FUM outflows slow down and eventually stop? Or will it go on for longer than what the overall market is expecting?
Only time will tell. But, as FUM continues to flow out of the door, the fund manager will generate lower net profit and pay smaller dividends. That’s not ideal.
One of the best ways for Magellan to stop money leaving is by beating the market’s return. It had been underperforming over the last couple of years, but things may be starting to look up.
The hard part is knowing what’s going to happen next. But I don’t have a time machine. Either Magellan can get back to winning ways, or not in which case the Magellan share price is probably realistic.
