The Magellan Financial Group Ltd (ASX: MFG) share price has had a difficult 2021. In the year to date, Magellan shares have dropped 45%.
But that's the past. What does the next year look like for Magellan in 2022?
Performance heading into 2022
The investment performance of some of Magellan's biggest funds has disappointed. For example, over the last three years the Magellan Global Fund (Open Class) (ASX: MGOC) has returned an average of 13.1% per annum over the last three years, underperforming the global benchmark by an average of almost 5% per annum.
Despite that, Magellan's funds under management (FUM) continues to rise. In November 2021, the total FUM increased by $1.6 billion to $116.4 billion. However, within that, was a mixed performance of FUM. The higher margin retail FUM dropped around $80 million to $30.23 billion, whilst the lower margin institutional FUM rose around $1.7 billion to $86.2 billion.
However, leadership changes may also be impacting investor thoughts about the business and the Magellan share price.
The company's CEO Dr Brett Cairns resigned for personal reasons. He has been replaced by the chief financial officer (CFO) by Ms Kirsten Morton to be the interim CEO. Investors also learned that Magellan's chair and chief investment officer (CIO) Hamish Douglass had separated from his wife, though they don't intend to sell any shares.
Growth avenues
Magellan points to other parts of its business, away from the main global shares strategy, that can produce FUM growth with "significant opportunities" and the combined FUM is around $30 billion.
Those five areas are: global listed infrastructure, Airlie Funds Management, sustainable and ESG strategies, the MFG Core series of exchange-traded funds (ETFs) and FuturePay.
Magellan said that infrastructure has a significant runway, the Australian funds have a substantial opportunity to build a retail franchise, the ESG strategy has total capacity of around $20 billion (with only $500 million of FUM at its AGM), there is growing demand for cheaper ETF products and the FuturePay product is tapping in the huge retirement capital and the desire for reliable income.
Magellan Capital Partners is another area with the potential to create long-term growth which currently includes the sizeable investments in the businesses Barrenjoey and Guzman y Gomez.
Price targets on the Magellan share price
Different analysts have different thoughts on the company.
UBS has a sell rating on the fund manager, with a price target of $29.50. The broker is concerned about lower revenue due to potential outflows of FUM and/or cutting the fees for clients.
However, the brokers at Macquarie Group Ltd (ASX: MQG) think it's a buy with a price target of $38. However, the fund manager looks historically cheap to Macquarie and the dividend yield – an almost 8% partially franked yield in FY22 on the broker's numbers – is supportive for the business valuation.
