The Magellan Financial Group Ltd (ASX: MFG) share price is in focus today after the fund manager announced its quarterly funds under management (FUM) update.
Investors may notice that Magellan experienced FUM outflows during the three months to 30 September 2021.
Magellan's FUM decline
The fund manager reported that its total FUM was $113.3 billion at the end of September 2021. This was a decline of around $4.7 billion from August 2021. It was also a decline of around $600 million from June 2021.
Magellan said that for the three months to September 2021, the fund manager experienced net outflows of $1.53 billion, which represented approximately 1.3% of average FUM over the quarter. This decline was made up of net retail outflows of $617 million and net institutional outflows of $910 million.
What happened?
The fund manager did try to explain what happened during the quarter. FUM changes can have a sizeable impact on investor thoughts on the Magellan share price.
Regarding the net institutional outflows, $1 billion of outflows were the result of three clients rebalancing their portfolios across global equities ($410 million), infrastructure equities ($410 million) and Australian equities ($180 million). Magellan looked to reassure investors by saying that all three clients were retained, each with a mandate of more than $2 billion with Magellan at 30 September 2021.
The fund manager also said that no institutional mandates were lost during the quarter and its global sustainable strategy secured its first two mandates during the quarter.
Turning to the retail outflows. Magellan explained that approximately 23% of net retail outflows related to redemptions from the Magellan High Conviction Trust after the decision to open the fund as an active exchange-traded fund (ETF). The Magellan High Conviction Trust had total FUM of approximately $889 million at 30 September 2021.
How has the Magellan share price performed recently?
Before the share price reaction today, over the last month the Magellan share price had fallen 22%. In the 2021 calendar year to date, it had dropped by 36%.
Since the released of the FY21 result, Magellan's shares have declined by 34%.
Magellan reported that adjusted net profit before tax increased 3% to $587.7 million. However, including its share of the profits and losses of investments/associates (like Barrenjoey), adjusted net profit after tax declined 6%.
Including the $154.1 million of transaction costs relating to strategic initiatives (after tax), Magellan's net profit after tax fell 33% to $265.2 million.
Looking at the underlying performance of the funds management business, average funds under management (FUM) grew 9% to $103.7 billion and the profit before tax and before performance fees rose 10% to $526.6 million.
Valuation
Using the Commsec earnings forecast, the Magellan share price is valued at 13x FY22's estimated earnings at the pre-open price.
