Magellan (ASX:MFG) share price falls 2% after investor warning

Why are Magellan shares falling today?

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The Magellan Financial Group Ltd (ASX: MFG) share price is under pressure today. Magellan shares are currently trading at $36.89 each, down 2.25% for the day so far. That’s a little worse than the broader S&P/ASX 200 Index (ASX: XJO), which is presently down 1.2% so far this Tuesday to 7,296 points.

So why is Magellan, one of the largest fund managers on the ASX, down again today?

Well, one possible reason has emerged. According to a report in today’s Australian Financial Review (AFR), Magellan is facing some pushback from one of its own investors. According to the report, the United Kingdom-based wealth manager St James’s Place represents around “one quarter of Magellan’s institutional funds under management [FUM]” and around 18% of its total FUM.

That’s according to research from broker Jarden. Jarden has revealed that St James’s Place has downgraded Magellan to “amber” under its ‘traffic light system’.

Jarden found that a St James review of Magellan’s mandate reported an “unfavourable concentration risk” with its current position. The report states that this is unlikely to result in St James pulling funds out of Magellan’s management. However, the amber light does reportedly prompt a concern of “specific areas for closer ongoing monitoring”.

It’s perhaps no surprise some investors may have gotten some cold feet with this news. Institutional funds are an essential component of Magellan’s business model. Earlier this month, we broke down Magellan’s most recent FUM figures, which showed that out of the $117.96 billion of FUM the company has, $86.44 billion (or 73.3%) came from institutional investors.

About the Magellan share price

Magellan used to be an ASX share with a growth reputation. As an example, the Magellan share price rose by roughly 150% between January 2019 and January 2020.

However, that reputation has suffered more recently. The company is down approximately 30% year to date in 2021 alone, and is also down by ~35% over the past 12 months. It also remains down by almost 50% from its early 2020 all-time high of roughly $74 a share.

At Magellan’s current share price, the company has a market capitalisation of $6.82 billion. It also has a price-to-earnings (P/E) ratio of 25.65, and a dividend yield of 5.7%.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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