The Magellan Financial Group Ltd (ASX: MFG) share price is down 7% after the fund manager revealed another poor monthly flow update for June.
Funds flow out again in June
Magellan said that for June, the fund manager experienced net outflows of funds under management (FUM) $2.1 billion, including net retail outflows of $0.4 billion and net institutional outflows of $1.7 billion.
Despite the outflows from retail investors (which means people like you and me), total retail FUM remained at $18.4 billion, while institutional FUM dropped from $23 billion at 31 May 2023 down to $21.3 billion at June 2023.
Institutional FUM has dropped so much over the months and years that it’s almost the same level as retail FUM.
In terms of the different strategies, global shares saw a $1.3 billion decline over the month to $19.1 billion. Infrastructure shares saw a $0.5 billion decline to $16.1 billion. However, Australian shares saw a $0.1 billion increase to $4.5 billion.
FUM dropping is certainly not helping the Magellan share price.
Distributions to be paid
Magellan said that it’s going to pay distributions (net of reinvestment) of approximately $0.3 billion in July, which will be reflected in the FUM figures in next month’s announcement.
Performance fees
Magellan earns management fees by just managing the funds, but if one of its funds outperforms the benchmark then it can earn outperformance fees.
The fund manager said that it is entitled to estimated performance fees of approximately $11 million for the year to 30 June 2023, which is a lot smaller than prior years.
Thoughts on the Magellan share price
I’m not surprised that the share price has sunk after this update. The May update showed a net outflow of just $0.5 billion, with flat institutional net flows.
The fund manager is currently able to say that its main global shares strategies outperformed the global benchmark in the 2023 year to date to May 2023. But, this hasn’t been enough to stop the outflows.
If it keeps outperforming then that may be enough to encourage investors to leave their money with the fund manager. If money keeps flowing out then it could keep reducing Magellan’s FUM faster than performance grows it.
I don’t think Magellan is a long-term buy, but there’s a small chance it can regain some ground if it can keep outperforming the global share market benchmark.
