The Magellan Financial Group Ltd (ASX: MFG) share price fell again, dropping 3% as the fund manager just revealed more pain.
Magellan was one of the largest fund managers in Australia. But it’s now suffering every month.
November monthly FUM pain
In what seems to be a regular occurrence, Magellan just told investors about another month which saw outflows exceed $2 billion.
In November, Magellan experienced net outflows of $2.5 billion, which was made up of net retail outflows of $0.6 billion and net institutional outflows of $1.9 billion.
The actual total FUM fell from $51 billion at the end of October 2022, to $50.2 billion at the end of November 2022. So, while there was a positive investment performance over the month, it was more than offset by the outflows.
Institutional investors taking their money away from Magellan’s global shares strategy seems to still be the problem.
Looking at the FUM breakdown, retail FUM rose from $20.5 billion to $20.6 billion, but institutional FUM dropped from $30.5 billion to $29.6 billion.
In terms of strategy, the global shares saw FUM decline from $26.3 billion to $24.6 billion. Infrastructure shares saw FUM rise from $16.2 billion to $16.8 billion. Australian shares FUM also saw a rise, going from $8.5 billion to $8.8 billion.
So, if Magellan were a fund manager focused on infrastructure and Australian shares for retail/regular investors, then it would have seen a rise of FUM.
What does this mean?
Magellan’s global funds continue to lose investor confidence it seems, which is hurting the Magellan share price.
The fund manager needs to deliver some outperformance to make it seem like it’s worthwhile to stick around. But, it can be a dangerous game to try to chase outperformance in the short-term.
The end of rising interest rates could be a boost for the business, as both its growth shares and defensive shares have suffered during this valuation reset.
At some point the FUM outflows are likely to stop, or heavily slow down. But, it’s suffering significant damage to earnings as billions of dollars of FUM flows out of the door.
It would help if the business were able to keep growing its infrastructure and Australian shares FUM, and perhaps make an acquisition to diversify earnings. But, I don’t think the Magellan share price is worth pursuing until the outflows stop, because it could continue to be a falling knife until then.
