Magellan Financial outflows continue in July

The investment manager remains under intense pressure as outflows of funds under management continue to the tune of $2.5bn.

Magellan Financial, led by David George, remains under pressure as outflow of funds under management continue.

Magellan Financial Group’s painful outflow of funds under management amid a subpar investment performance in recent years continued last month, with the global fund manager reporting net outflows of $2.5bn, including $400m retail and $2.1bn institutional.

It came as the flagship Magellan Global Fund underperformed its benchmark MSCI World Net Total Return Index in US dollars by 5.4 per cent in the year to July.

But Magellan’s funds under management were cushioned by a rebound in global equities.

Total FUM fell to $60.2bn in July from $61.3bn in June.

In an investor update on Thursday, Magellan said global equities FUM slipped to $33bn from $33.3bn, while infrastructure equities FUM was $18.9bn from $20.1bn, and Australian equities FUM rose to $8.3bn from $7.9bn.

The MSCI World index rose by 7.9 per cent last month after diving 17.4 per cent in the preceding three months. Australia’s S&P/ASX 200 index rose 5.7 per cent in July after falling almost 13 per cent in the previous three months.

The embattled fund manager, which recently appointed former Future Fund deputy David George as its new chief executive, has fought to stem outflows for the past two years.

Magellan’s investment performance has suffered from post-pandemic volatility in tech stocks and China’s regulatory crackdown, culminating in the departure of high-profile founder and former chairman and chief investment officer, Hamish Douglass.

Mr Douglass went on leave in February, months after the departure of co-founder Brett Cairns, who abruptly quit as CEO in December.

After peaking at a record high of $74.91 in February 2020 as the Covid-19 pandemic hit, Magellan shares lost as much as 85 per cent of their value after hitting an eight-year low of $11.10 in June.

The share price has bounced as much as 38 per cent from the low amid a rebound in US mega-cap growth stocks such as Amazon and Microsoft, and potentially some optimism about the pending return of Mr Douglass as an investment consultant to the fund manager.

However, the continued slide in funds under management is expected to add to a slump in profit for the financial year ending in June 2023.

Magellan’s funds under management had collapsed by almost 49 per cent to the July level after peaking at a record high of $117.95bn in August 2021.

Magellan’s market capitalisation as a percentage of FUM jumped to 4.5 per cent in July from 3.7 per cent in June, well above peers like AMP, Challenger, Perpetual and Janus Henderson.

An on-market buyback of up to 10 million shares representing 5.4 per cent of the company was announced in March but it has only bought 550,000 shares since the announcement.

On July 1 it was revealed that Mr Douglass and associates sold 760,000 shares, reducing his stake in the company to 11.58 per cent from 12.66 per cent.

Magellan shares closed 17c higher at $14.80.