The Magellan (ASX:MFG) share price is now down 40% since July

Why has the Magellan share price been struggling lately?

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Today was yet another day of bad news for the Magellan Financial Group Ltd (ASX: MFG) share price. Magellan shares have closed at $34.27 a share today, down a nasty 2.8%. That puts this fund manager pretty close to its 52-week low of $31.34.

It also means that Magellan shares are now down around 35.4% year to date in 2021 so far, more than 45% over the past 12 months, and a depressing 53.5% off of the all-time high this company hit back in early 2020. Indeed, Magellan is now down close to 40% only since July.

Magellan used to be a much-beloved growth share, rising from around $23 a share in late 2018 to the all-time high of almost $74, back in February 2020. So what’s gone so wrong for this company?

Why is the Magellan share price on struggle street?

Well, it could be a number of factors. Firstly, ASX brokers haven’t exactly been showering this company with love lately. As my Fool colleague James probed last week, broker UBS has recently retained its ‘sell’ rating on Magellan, giving the fund manager a 12-month share price target of $29.50. UBS doesn’t like the outflow of funds that the company has been experiencing in recent months, which puts pressure on the fees it can collect. It also cited the “ongoing underperformance of its global fund”.

So that brings us to our second possible factor here. Magellan runs a stable of managed funds and actively-managed exchange-traded funds (ETFs). Some of these, such as the Magellan Global Fund (ASX: MGF) are some of the largest in the Australian market. However, many of Magellans’s funds have indeed been struggling lately.

Let’s look at the Magellan Global Fund. Its unlisted iteration has returned 8.48% over the past 12 months. In contrast, its benchmark MSCI World Net Total Return Index has returned 31.29% over the same period. It is also trailing this index’s returns over the past 3, 5 and 7 years. Over the past 10, the Global Fund has returned an average of 16.67% per annum against the index’s 16.14%.

Magellan’s unlisted High Conviction Fund, which has an ASX-listed form in Magellan High Conviction Trust (ASX: MHHT), has delivered an average of 15.06% per annum since its inception in July 2013.

Investors know that if Magellan fails to deliver meaningful benchmark outperformance over a significant period, its investors might decide that a cheaper index-tracking ETF is a better bet. So this also might be weighing on investors minds as they send the Magellan share price towards its 52-week low.

Unless these performance metrics improve, it’s possible that the Magellan share price could continue to struggle.

At today’s closing Magellan share price, this company has a market capitalisation of $6.52 billion, with a dividend yield of 6.16%.

Should you invest $1,000 in Magellan right now?

Before you consider Magellan, you'll want to hear this.

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*Returns as of January 13th 2022

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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