The Magellan Financial Group Ltd (ASX: MFG) share price is in focus after revealing its latest monthly funds under management (FUM). Time to buy?
Magellan used to be one of the largest fund managers in Australia. That’s not the case anymore.
Magellan FUM declines again
Every month, Magellan tells investors about how much money it’s managing on behalf of households and institutions. It’s measured as FUM.
At 28 February 2023, Magellan had $45.4 billion of FUM. That was a decline of $0.8 billion, or almost 2% in percentage terms.
The fund manager noted that in February it saw net outflows of $0.8 billion, which included net retail outflows of $0.5 billion and net institutional outflows of $0.3 billion.
It seems that the investment performance of its funds, on the whole, were neutral, while the overall FUM decline was because of investors pulling out funds.
Yet again, it was the global shares strategy that saw a huge part of the FUM decline, going from $20.8 billion to $20.1 billion. Meanwhile, infrastructure FUM dropped $0.1 billion to $16.3 billion and Australian shares FUM was stable at $9 billion.
Is the Magellan share price a turnaround buy?
For me, it all depends on whether Magellan can halt the fund outflows, otherwise it’s like trying to walk up an escalator that’s going downwards.
If Magellan can start generating outperformance, that could encourage investors to stick with the fund manager. But, it doesn’t help that its main global share strategy underperformed the global share market index in 2022, 2021 and 2020.
In the first decade of its life, Magellan benefited by being invested in rapidly-growing tech companies like Apple, Alphabet
and Microsoft. However, these businesses are now huge and unlikely to grow (earnings) as fast as they did over the 2010s.
If Magellan is to outperform, it needs to find some of the future major players.
The high management fees are a drag on net returns for investors, making outperformance less likely.
I don’t think Magellan’s defensive global share investment strategy is going to attract lots of FUM back, meaning I don’t think the Magellan share price has a lot of rebound potential, unless it diversifies its earnings.
There are other ASX growth shares and ASX dividend shares I’d rather invest in.
