Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
What’s behind the surge in Magellan shares this week?
The Magellan Financial Group Ltd (ASX: MFG) share price just jumped 12% in early trading despite funds under management (FUM) outflows in March.
Magellan share price rises
The funds management business just announced that between 11 March 2022 to 31 March 2022, it experienced net outflows of approximately $1.1 billion.
This comprised net retail outflows of $0.5 billion and net institutional outflows of $0.6 billion. In addition, Magellan has received notifications of intention to redeem $0.2 billion, which has been reflected in its FUM figures.
Total FUM rises
Magellan reported that while it did see FUM outflows, its total FUM increased from $69.1 billion on 11 March 2022 to $70 billion on 31 March 2022.
Considering the size of the respective FUM strategies, it was interesting to see that the Australian equities segment saw a $0.4 billion FUM increase to $9.9 billion. Global equities also saw a $0.4 billion increase to $39.6 billion. Infrastructure experienced a $0.1 billion rise to $20.5 billion.
Retail FUM is becoming increasingly crucial for the business. Retail FUM rose $0.5 billion to $25.7 billion, while institutional FUM rose by $0.4 billion to $44.3 billion.
Why did the Magellan share price go up so much?
Magellan shares have fallen by around 40% over the last six months, even after today’s rise.
A lot of negativity has been priced into the company’s valuation. The market was/is expecting the fund manager to see significant FUM leave the business. But based on these numbers, those outflows are slowing down.
The worst of the outflows could have happened sooner than some investors expected.
Magellan’s defensive strategies could also prove to deliver outperformance in the coming months amid all of this volatility. It would be very handy to start delivering outperformance to regain investor and market sentiment.
Is it an opportunity?
I think it’s doubtful that the Magellan share price can return to the earnings multiple valuation that it traded at in the last few years.
However, I do think that the business can stop the leakage of FUM. The global equities strategy may not get much love, but the infrastructure and Australian strategies could prove to grow FUM over time.
I also believe that the investments in Barrenjoey and Guzman y Gomez will be helpful over time. Barrenjoey and Guzman y Gomez will be beneficial. Magellan should also be a significant dividend payer in the coming years. It could be worth a high-risk investment, but I’m personally sticking with my own holding.
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