Magellan share price dips as Macquarie tips further outflows

Analysts are predicting a tough road ahead for the embattled fund manager.

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Key points

  • Magellan shares are falling again today, despite a short recovery this week
  • Analysts are still weary of the stock and urge investors to sell while they can
  • In the last 12 months, Magellan shares have slipped 65% into the red

The Magellan Financial Group Ltd (ASX: MFG) share price is enduring a tough end to the week, currently down 1.33% at $17 in afternoon trading.

As the fallout from a spate of internal and external pressures comes to full force, analysts are tipping further outflows for the embattled fund manager in 2022.

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More outflows to come?

Magellan released its latest funds under management (FUM) update yesterday. In it, the company reported another $1.1 billion in net outflows between 11 March and 31 March. Across the board, total FUM stood at $70 billion at the end of the March quarter. The Magellan share price spiked 11% yesterday on the back of the update.

However, analysts at Macquarie are confident investors will continue withdrawing funds from the firm, with outflows likely to persist until FY24, it says.

It expects heavy outflows in Q4 FY22 that look set to extend well into a $7.8 billion outflow in 1H FY23.

“We expect outflows of $7.1 billion in 4Q FY22 and $7.8 billion in 1H FY23 as recent investment performance has remained below respective benchmarks and the stronger AUD will continue to weigh on investment performance,” it said in a note.

“We continue to expect material outflows to persist for several quarters limiting scope for re-rating,” it added, pegging FUM to eventually sink to $56 billion in FY23.

This would imply a total outflow of $25 billion in FUM from its flagship fund, Macquarie says, cited by Bloomberg.

Meanwhile, UBS reckons the likelihood of a turnaround at Magellan is highly unlikely, analyst Shreyas Patel said in a note.

“Fundamentals remain poor with ongoing investment underperformance, reduced performance fee potential, higher outer year staff retention costs, and risks to retail fees,” the analyst commented.

It too believes there will be $24 billion in outflows for 2H FY22, setting the firm up for potentially extensive losses.

Macquarie and UBS both have Magellan as a sell on a valuation of $13.25 and $13 respectively.

In the last 12 months, the Magellan share price has slipped 65% into the red.

Motley Fool contributor Zach Bristow 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 recommended Macquarie Group Limited. 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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