Turning point? Magellan (ASX:MFG) posts market-beating fund returns for December

Could this be a turning point for Magellan?

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Key points

  • Magellan shares had a year to forget last year
  • A series of negative developments pushed Magellan shares to new lows
  • But could a spirited December performance mean that the worm has turned?

Much has been made of the frankly awful performance of the Magellan Financial Group Ltd (ASX: MFG) share price over 2021. Last year, Magellan shares lost a nasty 60% or so of their value, decimating this former high flyer’s reputation as a blue-chip growth share.

Magellan’s 2021 woes began with what has turned out to be some poor performances from its flagship investment funds in the months and years following the 2020 COVID share market crash. These performance issues were exacerbated by a number of developments in Magellan’s corporate sphere. Last last year, the company was rocked by the sudden (and unexplained) departure of its CEO Brett Cairns. Not only that, there was the news of co-founder and chief investment officer Hamish Douglass’ divorce. And then we had the loss of a major St. James Place funds management mandate for the company.

Long story short, it seemed that everything that could go wrong with Magellan in 2021, did.

But perhaps the embattled fund manager has reached a turning point. Let’s take a look at the company’s latest performance figures that have just been released for the month of December.

Magellan gives its investors some much-needed outperformance

So the company’s flagship Magellan Global Fund (ASX: MGF) returned 3.3% over the month of December 2021. That was a very healthy outperformance of 1.6% against the benchmark MSCI World Net Total Return Index (AUD). Magellan’s management said that the fund’s strong holdings in Microsoft Corporation (NASDAQ: MSFT), PepsiCo Inc (NASDAQ: PEP) and Intercontinental Exchange Inc (NYSE: ICE) were the major contributors to this outperformance. Meanwhile, Magellan’s Chinese investments continued to weigh on the fund, with Alibaba Group Holding Ltd being a major detractor.

Such a spirited outperformance might help assuage some of the concerns investors have evidently had with Magellan. Reading these numbers would certainly be eliciting some sighs of relief for many investors (not to mention at Magellan’s corporate headquarters).

But even so, December’s performance wasn’t enough to cover up the funds’ longer-term underperformance. After factoring in December’s numbers, the unlisted iteration of the Global Fund is still trailing its benchmark by -10% over the past 12 months, and by -1% per annum on average over the past 5 years.

But, a turnaround has to start somewhere, some might argue. And Magellan has certainly kicked off 2022 on a positive note in light of these numbers. No doubt shareholders will be keeping their fingers crossed that the company can keep it up.

At the current Magellan share price of $20.42 (at the time of writing), this company has a market capitalisation of $3.8 billion, with a trailing dividend yield of 10.36%.

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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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