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Date : 11/01/2023

Magellan Financial Group (ASX: MFG) shares Plunge after another decline in its FUM

Magellan Financial Group is a funds management company based in Sydney, Australia. It was founded in 2006 and Magellan shares are listed on the Australian Securities Exchange (ASX) under the ticker symbol MFG.

MFG manages investment portfolios, including mutual funds and other financial products. It focuses on global equities and fixed-income investments and offers a range of products to retail and institutional investors.

Following its inception, the group attracted worldwide and Australian investors due to the success of its investments.

MFG share price declined as the company revealed a significant drop in the Funds Under Management.

MFG Share Price: FY22 Highlights

Magellan shares (ASX: MFG) plunge more than 10% after another decline in its FUM. MFG share price is trading at $8.68 and has a market cap of $1.5 Billion.

ASX-MFG Shares Analysis & Research

More of our Magellan Financial Group shares analysis & research below:

  1. MFG’s revenue in 2022 was $550 million, a decline of 23% as compared to 2021.
  2. Although its net income increased 44% to $383 million in FY22.
  3. Its EBITDA was red at -31% or $418 million in FY22.
  4. Its cash and cash equivalents increased 98% to $420 million at the end of FY22.

MFG: The Reason for Magellan share price decline

Based on its recent price appreciation, several traders are placing their money on Magellan shares, making a comeback in 2023.

This morning, the market may have reacted too quickly to another dismal report on Magellan’s funds under management, leading to widespread selling.

The announcement states that as of December, Magellan had a FUM of $45.3 billion. This totals $20.6 billion for international stocks, $16.2 billion for infrastructure stocks, and $8.5 billion for Australian stocks.

Magellan shares have responded negatively since the end of the month, suggesting that the firm has seen a significant decline in its funds. Since the end of November, it has lost $4.9 billion, or 10%, of its FUM, bringing the total to $45.3 billion.

As reported by management, there were net outflows of $2.6 billion during the month. This includes net outflows of $0.6 billion from individual investors and net outflows of $2.0 billion from institutional investors. The value of its resources was lowered by fluctuations in the dollar’s value.

Even with this most recent drop affecting MFG share price, the corporation still managed an average of $53.8 billion from July through December. This is much lower than the last comparable period’s average ($112.7 billion).

MFG: Another unsatisfactory result

If fund management can exceed its benchmark, it will be compensated with outperformance fees.

However, for the last two and a half years, Magellan’s investment record could have been better. According to Magellan’s report for the six months ending on 31 December 2021, state performance fees “are not significant.”

According to fund management, performance fees are very unpredictable. However, the organisation must regularly produce a significant amount of performance fees.

For certain fund managers, outperformance fees are only earned if the fund’s value increases beyond its prior high point.

MFG: The expected decline in HY23 profit

As reported by Magellan Financial Group, the average FUM for the six months ending 31 December 2022 was $53.8 billion, down from $112.7 billion in the preceding equivalent period. We’re talking about a decrease of more than half!

Since institutional FUM typically produces less income than retail FUM, this may have had a minor effect on revenue. Still, it does signal that the reported profit will fall in the FY23 half-year result. This might add to the downward pressure on MFG share price.

Take Away

Is ASX-MFG a “buy”?

Investors in Magellan shares likely have their fingers crossed that the flow of FUM will shortly slow down. At the moment, we are still determining when this will stop. Investors will not want to remain with ASX MFG shares if the company continues to underperform. In 2023, if the company’s FUM continues to fall at the same rate, this factor might put pressure on MFG share price.

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