The Magellan Financial Group Ltd (ASX: MFG) share price has risen more than 3% after the release of its monthly funds under management (FUM) update.
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.
Magellan’s August 2019 FUM Update
Magellan said that at 30 August 2019 its funds under management had grown to $92 billion from $89.7 billion the month before.
During August, Magellan experienced net inflows of $315 million, which included net retail inflows of $162 million and net institutional inflows of $153 million.
Looking at the breakdown of the numbers, its global shares strategy saw a FUM increase of almost $2 billion. The infrastructure equities strategy saw an increase of around $550 million whilst Australian shares fell by approximately $130 million.
Is This Good News?
It’s nearly always good news for an investment manager to be in charge of more money because it means higher management fees and potentially bigger outperformance fees if it indeed outperforms the various benchmarks.
The fact that Magellan continues to experience net inflows is impressive despite the worsening trade war between the US & China and other global political worries like Brexit.
Over the past year the Magellan share price has increased by 90%. It’s unlikely that the next 12 months will be anywhere near as good, but as long as the global share market continues to slowly rise then Magellan’s FUM is likely to keep going upwards.
Fund managers are under pressure these days from low cost ETFs, but Magellan keeps growing.
It’s a good business because most additional management fees just add to the bottom line, because money management is a very capital light industry.
With a trailing ordinary fully franked dividend yield of 2.6%, Magellan is not exactly a dividend share any more. I’m not a buyer at today’s prices, but I wouldn’t be surprised to see its total returns outperform the ASX over the longer term even from today’s price.
But I’d much rather buy shares of the rapidly growing businesses revealed for free in the report below.
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