Shares in Magellan Financial Group Ltd (ASX: MFG) are around 1% lower this morning following a red day yesterday after the international equities fund manager revealed net fund outflows of $171 million for the month of February.
Net institutional outflows of $281 million were to blame, with net retail inflows of $76 million into the the Global Equities strategies one positive over a month where total funds under management fell to $38.8 billion largely to due to market depreciation.
The institutional outflows are disappointing, but part and parcel of the operations of any medium-sized asset manager, what really counts is institutional business development and winning large new mandates that can dwarf run-of-the-mill outflows.
Global institutional money management markets are huge and lucrative (but competitive), with Magellan actively looking to win new business in the US, and UK via its relationship with large UK investment house St James Place.
While big institutional business wins appear to have been modest over the past year, the higher margin retail distribution business goes from strength to strength reportedly due in part to new distribution agreements with platform providers like AMP Limited (ASX: AMP).
The bumper retail inflows also reflective of a shift towards more SMSF and other investors recognising that US equity markets may offer diversification and superior returns to the traditional blue-chip Australian businesses.
At its half-year results Magellan lifted its net profit and earnings per share by a bumper 41% over the prior corresponding half, while the interim dividend jumped 38% to 51.3 cents per share.
The appreciating Australian dollar may prove a minor headwind for Magellan investors in 2016 if its recent rise proves sustainable, although Magellan easily remains the best financial stock on the ASX to buy for investors in my opinion.
Its primary advantages being its founder-led nature, strong FUM growth, overseas exposure, and fact that its organic growth can be planned without staff numbers / costs ballooning out of control as is common at inferior fund managers with little focus on shareholder returns or long-term performance.
