The Magellan Financial Group Ltd (ASX: MFG) share price is in the red as the fund manager announced its latest monthly update.
Magellan used to be one of Australia’s biggest fund managers. But it has gone down a lot in size over the last year, with the Magellan share price down 68%.
Latest FUM loss
On 29 July 2022, Magellan had $60.2 billion of FUM.
By 31 August 2022, the FUM had fallen again to $57.6 billion. Over one month, this represents a loss of FUM of $2.6 billion.
It’s true that some of that decline could be put down to volatile investment markets.
However, Magellan did say that in August it experienced net outflows of $1.3 billion. This comprised of net retail outflows of $0.6 billion and net institutional outflows of $0.7 billion. This is not good for the Magellan share price or earnings.
Of the net retail outflows, $0.2 billion of it was due to a “broad-ranging” restructure of a client’s platform investment menu, which resulted in the termination of a mandate. That certainly hasn’t been the first mandate that Magellan has lost over the past 12 months.
In just one month, Magellan suffered a loss of over 2% of its FUM.
Magellan’s infrastructure division saw a fall of FUM of $0.4 billion. It was the global shares division that suffered the biggest drop – a $2.3 billion decline.
But, the Australian shares segment seems to still have investor confidence. The Australian shares FUM rose from $8.3 billion to $8.4 billion.
What next for the Magellan share price?
It’s getting close to its 52-week low again. Just because it has fallen a lot doesn’t mean it can’t keep falling. Until FUM stops falling I’m not sure what will be a positive catalyst for Magellan.
The investment team need to somehow generate outperformance after fees, but one shouldn’t panic and try to make short-term returns – Magellan still needs to invest for the long-term.
I think the decision to sell its stake of Guzman y Gomez will prove to be a long-term mistake, while the conservative positioning after the COVID crash has cost Magellan dearly in terms of returns and confidence. Why not just invest in an area like COVID testing healthcare shares or something similar, if there was a concern about COVID impacts?
While Magellan could turn things around in the medium-term, there are other ASX shares I’d rather invest in now for the long-term.