The Magellan Financial Group Ltd (ASX: MFG) share price is down 4.6% in early trade this morning, here’s why.
Magellan is a funds management business that largely invests in international shares like Facebook and Visa. It was set up in 2006 by Hamish Douglass and Chris Mackay. Since inception, Magellan claims it has been one of the most consistent market outperformers after fees.
Why The Magellan Share Price Is Down
I think the blame for the share price can be put firmly in the ‘trade war’ box that’s going on between the US and China.
Investors are worried that the trade war isn’t just a quick skirmish, but it seems as though it could go on for many months which may send local economies and the global economy into a recession if it goes unresolved this year.
Magellan would be affected because its funds under management (FUM) would fall as the market drops, leading to lower management fees.
However, I think there’s a good reason why Magellan’s share price is only down by 4% rather than a higher number.
Magellan’s July 2019 FUM Update
Magellan chose today to release its FUM update for July 2019. It showed that its total FUM increased to $89.7 billion at 31 July 2019 from $86.7 billion at June 2019.
Most of the increase was seen from the global equities strategy, which increased from $64 billion to $66.4 billion.
In July the fund manager experienced net inflows of $574 million, which included net retail inflows of $349 million (including re-investing cash distributions) and net institutional inflows of $225 million. Speaking of distributions, Magellan paid $603 million of distributions in July, net of reinvestment.
This seemed like a very solid update from Magellan. If the share market wasn’t currently going through a tough time, its share price would probably be up a few percent.
Magellan is likely to keep attracting FUM inflows at an attractive rate. But until this volatility has finished I’d want to wait to see if an even better share price comes along.
Until then, the rapidly growing businesses in the free report below could be interesting choices too.
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