Funds management business, Magellan Financial Group Ltd (ASX: MFG) provided its monthly update on the group’s funds under management (FUM) at the end of April. Despite total funds increasing month over month, shares have moved to the downside.
At the time of writing, the Magellan share price is down 0.7% to $46.76 per share.
Which alone is fairly uninteresting. But the news is paired with nearly two weeks of on-market purchases by Magellan’s chair, chief investment officer, and lead portfolio manager – Hamish Douglass.
Money where the mouth is
Over the last two weeks, Mr Douglass has loaded up on units in two of Magellan’s listed investment funds. These funds are the Magellan Global Fund (ASX: MGF) and the Magellan High Conviction Trust (ASX: MHH), both of which he manages.
It certainly instils confidence in investors when a portfolio manager is practising what they preach. Prior to the recent splurge, Mr Douglass was already a top shareholder in both funds.
So, just how much has he gobbled up? Well, I took the liberty of adding it all up. Across 10 days of purchasing, the respected investment manager has bought $3.19 million worth of units.
Additionally, the split between the funds was $1.72 million in the Global Fund and $1.47 million in the High Conviction Trust. Such numbers sound like big positions (they are), but it only represents roughly a 5% lift in his prior holding.
Buying while Magellan underperforms ASX
It seems Hamish Douglass is following the great Warren Buffett’s mantra: “Be fearful when others are greedy and be greedy when others are fearful.” The value of units in both funds has substantially underperformed the market over the last year.
The Magellan Global Fund has lost 6% over the past 12 months. A repercussion of half the fund’s portfolio held in cash and defensive equities. That positioning held back gains from its top holdings such as Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOG), and Facebook Inc (NASDAQ: FB).
On the positive side, with the recent tech sell-off, Magellan is well-capitalised to load up on some growth companies at a discounted rate. This is exactly what other investors are doing, based on Magellan’s FUM for April.
Most of the $4.373 billion added in the last month went towards Magellan’s global equities. Nearly $3.6 billion went into the group’s global equity investments.