The Magellan Financial Group Ltd (ASX: MFG) share price is holding steady despite analysts sharing concerns for the fund manager in the near term.
At the time of writing, shares in Magellan are swapping hands at a price of $18.18, up 3.2%. This follows yesterday's pleasant change of scenery for the company's shareholders as the share price ascended 7.2%.
However, some analysts are being cautious to jump back on the Magellan bandwagon. After a monumental fall from grace, equity onlookers are wary of a few more lashings yet to be delivered to the Australian fund manager.
Teething issues as clients adjust to a new face
It wasn't too long ago that Hamish Douglass — Magellan Financial Group co-founder and portfolio manager — was touted by many as a superstar. The incredible success of Douglass' investments sent funds flocking to Magellan over the years.
Although, even superstars are capable of making a misstep. For Douglass, the decision to go cash-heavy during the COVID-19 recovery led to underperformance across the funds managed by ASX-listed Magellan.
As often the case, when it rains, it pours. A period of underperformance for the company's funds set the pace for a tumbling of dominos — cascading until Douglass made the decision to go on medical leave.
The task of picking back up the pieces has now been put in the hands of fellow co-founder, Chris Mackay. This includes a battered investment book, now hosting funds under management (FUM) of A$93.5 billion. Indeed, the A$116.4 billion in November 2021 seems like a distant memory.
Unfortunately, analysts are forecasting the situation to get worse before it gets better. Namely, the team at UBS, who believe the change in leadership presents a heightened risk of further outflows. Additionally, this could spell more bad weather for the ASX-listed Magellan share price.
Director at UBS, Shreyas Patel said:
While the stock is starting to reflect risks around key-person, outflows… and underperformance, there are still more questions than answers with respect to the outlook.
Recapping Magellan's recent run on the ASX
Shareholders of Magellan Financial Group have endured an abysmal start to 2022. While the S&P/ASX 200 Index (ASX: XJO) hasn't provided attractive returns — being down 5% — it is still better than the performance delivered by the Magellan share price.
On a year-to-date basis, ASX-listed Magellan shares are down 17.6%. This is creating a difficult situation for investors to gauge whether the company is undervalued at these levels.
Notably, the price-to-earnings (P/E) ratio is at its lowest in more than eight years. Currently, this metric is sitting at approximately 11.4 times. The only time the Magellan share price reflected a P/E this low in recent history was in 2018, at 15 times.
