Magellan share price sinks on $2.1 billion FUM outflow

Magellan's fund outflows have accelerated again.

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The Magellan Financial Group Ltd (ASX: MFG) share price is having a tough time on Thursday.

In morning trade, the struggling fund manager's shares are down 6% to $9.13.

Why is the Magellan share price dropping?

Investors have been hitting the sell button today after the company released its latest funds under management (FUM) update.

According to the release, in June, Magellan experienced net outflows of $2.1 billion. This includes net retail outflows of $0.4 billion and net institutional outflows of $1.7 billion.

This left Magellan with total FUM of $39.7 billion, which comprises $18.4 billion of retail FUM and $21.3 billion of institutional FUM.

As a comparison, one year ago Magellan had total FUM of $61.3 billion and two years ago its FUM stood at $113.9 billion.

Why the selling?

Today's update is likely to have been a big disappointment to the market. After all, last month the Magellan share price surged 20% thanks largely to an encouraging FUM update.

In May, Magellan experienced net outflows of just $0.5 billion. This reflects net retail outflows of $0.5 billion, with net institutional flows remaining flat. The latter was the best result in some time and appeared to hint that the FUM outflow bloodbath was behind the company.

Clearly that was not the case.

Performance fees

Magellan also revealed that it estimates that it will be entitled to performance fees of approximately $11 million for the 12 months to 30 June.

This is in line with what it reported a year earlier but remains down sharply on the $30 million commanded the year before that.

The Magellan share price is now down 23% over the last 12 months.

Motley Fool contributor James Mickleboro 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 Scott Phillips.

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