That's not far off the wealth manager's 52-week low of $10 a share reached earlier this month.

Magellan has been struggling all year, with its share price down a depressing 43% in 2022. That's four times the losses of the S&P/ASX 200 Index (ASX: XJO), which is down 10% in the year to date.

What's going on with the Magellan share price?

What a dog of a time it's been for the Magellan share price over the past couple of years. Holy moly.

Before the pandemic hit, this was a stellar stock trading above $65 per share.

But a bunch of things have happened to bring it down to its lows today.

Arguably, the most significant is the ongoing decline in funds under management (FUM).

The worst of it came in December 2021 when the fund manager announced it had lost the St James's Place mandate. This represented 12% of its annual revenue, so it was a mega-hit to Magellan's earnings.

As we reported earlier this month, investors withdrew a net $3.6 billion in September. This took total FUM to $50.9 billion. That's less than half the FUM reported in November 2021 ($116.4 billion).

In addition to the FUM decline, Magellan lost its leader in February.

Magellan announced that co-founder Hamish Douglass was taking medical leave. At the time, he was Magellan's chair and chief investment officer. Co-founder Chris Mackay took over.

Douglass returned to Magellan this month as a consultant stock picker.

Investment staff changes make ratings companies nervous

According to The Australian, rating company Lonsec has placed four Magellan funds on watch.

This includes the Magellan Global Fund (ASX: MGF). It follows the company announcing this week that Mackay would cease overseeing the global equities strategy.

Mackay took on the role after Douglass took leave.

The company also announced some other changes to its investment teams.

Among them, CEO and managing director David George has now been appointed chief investment officer (CIO) as well. George was installed as CEO in August.

Gerald Stack, previously the portfolio manager of the Magellan Infrastructure Fund, is now deputy CIO.

In addition, 10 staff were made redundant.

According to the article, Lonsec does not recommend new investment into the Magellan High Conviction Trust (ASX: MHHT).

In its latest report, Lonsec said:

Lonsec considers the announcement to represent a material change to the leadership of the investment team and will seek to meet with the go-forward team and have the rating resolved as soon as practicable thereafter.

Another ratings company Zenith has also put about 20 Magellan funds under review for the same reason. All of them were previously rated 'recommended' or 'highly recommended'.

The Australian reports that Zenith explained the move in a recent note to clients:

Zenith believes the executive and investment personnel changes are material, noting that Magellan's entire product suite is affected by the changes.

As such, Zenith has placed the following products Under Review until we meet with the relevant personnel, following which we will provide an update.

The post Why did the Magellan share price get bashed around today? appeared first on The Motley Fool Australia.

The RBA lifted the offical cash rate 50 basis points to 1.35% this month. Unlike last month, the central bank suggested August could bring a steadying of the cash rate, my Fool colleague Brendon Lau reports.

The ASX 200 was led by energy shares today, likely on the back of higher oil prices. The Brent crude price rose 1.7% to US$113.50 a barrel overnight while the US Nymex crude price lifted 2.1% in after-hours trade to reach US$110.66 a barrel.

That saw Woodside Energy Group Ltd (ASX: WDS) among the leaders of the pack. Its share price boasted a 5.3% gain at its intraday high.

The tech sector also performed well on Tuesday, with the S&P/ASX 200 Information Technology Index (ASX: XIJ) gaining 1.8%.

At the end of the session, nine of the ASX 200's 11 sectors were in the green, with only the industrial and real estate sectors languishing.

So, let's get to the most exciting part. Here are the ten shares that bested the rest on Tuesday.

Top 10 ASX shares countdown today

Taking out the crown as the top performer among the ASX's 200 biggest companies by market capitalisation is – drumroll please – WiseTech Global Ltd (ASX: WTC). Read more about the ASX 200 tech share here.

Next best was WAM Capital Limited (ASX: WAM). Find out what's been going on with the stock here.

Today's top 10 biggest gains were made by these ASX shares:

Data as at 4:00 pm AEST time.

Our top 10 ASX shares today countdown is a recurring end-of-day summary to ensure you know which companies were making big moves on the day. Check in at Fool.com.au after the market has closed during weekdays to see which stocks make the countdown.

The post Here are the top 10 ASX shares today appeared first on The Motley Fool Australia.

We've already discussed Transurban Group (ASX: TCL)'s upcoming dividend, as well as Rural Funds Group (ASX: RFF)'s ex-dividend gyrations this Wednesday. But here are three more ASX 200 shares that are going ex-div this week.

3 ASX 200 shares trading ex-dividend this week

Magellan Global Fund (ASX: MGF)

Magellan Global Fund is the flagship investment fund of Magellan Financial Group Ltd (ASX: MFG). It aims to achieve a net return of 9% per annum by investing in "20 to 40 of the world's best global stocks". Magellan Global Fund pays out a dividend distribution twice a year.

Its latest payment will be worth 3.66 cents per share, unfranked, and will be doled out on 21 July. The fund will trade ex-dividend for this payment on Friday, 1 July. So don't be surprised if we see a drop in the Magellan Global Fund's share price at week's end. At current pricing, Magellan Global units have a dividend yield of 5.55%

Regal Investment Fund (ASX: RF1)

Another ASX investment fund in Regal Investment Fund is next up. Regal focuses on alternative investments with little correlation to the broader markets. It uses techniques such as short selling and hedge fund investing to achieve outperformance. Regal also pays a dividend twice annually.

Its latest payment will be the final and unfranked dividend of 24.5 cents per share that investors will receive on 22 August. Regal shares will trade ex-dividend for this payment tomorrow (30 June). That will give Regal Investment Fund units a yield of 10.61% on current prices.

Liberty Financial Group Ltd (ASX: LFG)

Liberty Financial Group is our final share to check out. This ASX financial share is a provider of home loans, business loans and other financial products. Liberty Financial shares have gone ex-dividend today for the company's upcoming final dividend payment.

This will be worth 28 cents per share, unfranked, and will be paid out on 31 August. As one would expect with an ex-dividend date, Liberty shares have dropped by a hefty 6.51% today to $4.02 a share at the time of writing. This gives Liberty Finacial shares a dividend yield of 12.19% right now.

The post Here are 3 ASX financial shares going ex-dividend this week appeared first on The Motley Fool Australia.

Magellan is now up almost 15% since Tuesday morning's trading. However, that doesn't hide the fact this fund manager is still down 27% in 2022 thus far, and down a nasty 66% over the past year alone.

With the $15.44 share price at the time of writing, it's hard to imagine it was only a bit over two years ago that this company was fetching more than $70 a share.

So what on earth has gone so wrong for Magellan?

Well, there has been a seeming cavalcade of bad news stemming from the company in recent times. We had the reportedly temporary departure of its former star stock picker, Hamish Douglass, in February for health reasons. This followed public revelations of Douglass' divorce. But we also had some high-profile institutional funds pulling their capital out of Magellan's management.

But perhaps the root cause here is the disappointing performance of Magellan's underlying investments. Most of the company's woes seem to start there.

Magellan isn't shy when it comes to charging management fees. Its flagship Magellan Global Fund, which has an ASX-listed version in Magellan Global Fund (ASX: MGF), bills investors 1.35% per annum. Its Magellan High Conviction Fund (ASX: MHHT) charges 1.5% per annum. That's many multiples higher than what a typical index fund charges. So it's fair to say that with management fees like that, investors expect significant market outperformance.

But unfortunately, that is something the company has struggled with in recent years.

Magellan funds battle chronic underperformance

The Magellan Global Fund has returned 9.9% over the past 12 months, according to the company's latest data. That doesn't exactly look great against its MSCI World Net Total Return Index benchmark, which has given investors an 18.15% return over the same period. Over the past 5 years, the unlisted fund has returned an average of 11.65% per annum against the benchmark's 13.36% per annum. These metrics are after fees have been taken into account, by the way. It's only over the past 10 years that Magellan Global Fund beats its benchmark. But even then, it's by 0.01% per annum (15.23% versus 15.22%).

Magellan likes to say that its Global Fund has "downside protection built in". But over the past six months, the fund has lost 8.06% against the benchmark's 3.96%.

Although the company's High Conviction Fund doesn't use a benchmark, it has given investors a return of 10.27% per annum over the past five years, again below the MSCI's 13.36%.

So you get the picture. 

What's gone wrong?

Most of these woes stem from what seem to be poorly-timed investments. The company bet big on Chinese companies like Alibaba and Tencent, just before a series of Chinese regulatory crackdowns and geopolitical tensions saw investors lose faith en-masse in Chinese companies. 

Netflix Inc (NASDAQ: NFLX) was a major holding when the company dropped more than 20% upon an earnings report earlier this year. Netflix is now down more than 40% year to date. It was a similar story with Facebook, now Meta Platforms (NASDAQ: FB).

Now Magellan's co-founders have famously described themselves as disciples of Warren Buffett and his trademark buy-and-hold investing style.

Buffett has routinely been pilloried over his career for periods of underperformance, only to prove the doubters wrong again and again. Perhaps the same will happen with Magellan and its funds. But for investors who have been buying-and-holding Magellan funds or, indeed, Magellan shares, for years, patience would certainly be being tested.

At the current Magellan share price, this ASX 200 funds manager has a market capitalisation of $2.86 billion.

The post Down 80%, what's gone so wrong for Magellan (ASX:MFG) shares? appeared first on The Motley Fool Australia.

Magellan shares had a horrible day, no other way to spin it. The fund manager opened at $15.84 a share this morning, but has closed at $15.48 this afternoon, a drop of 3.25%. What's worse, Magellan shares fell to a low of $15.18 during intra-day trading. Not only is that low point a new 52-week low for Magellan. But it's also the lowest point the company's shares have plumbed in more than 7 years. Yes, the last time Magellan had a share price with a 15 in front of it was way back in December of 2014.

The company, once an ASX 200 high flyer, has now fallen close to 80% from the all-time highs of more than $73 a share that we saw back in early 2020.

There's been no major news or announcements out of Magellan over the past week. That's despite the fact that the Magellan share price has fallen more than 13% since Monday morning.

We can probably attribute some of that weakness to the gyrations of the broader market, which has been volatile this week. This has affected many other ASX 200 financial shares.

Magellan share price hits new 52-week low. How did we get here?

However, Magellan's woes arguably started long before that. This company has been battling a series of negative developments for months now.

For one, the performances of some of Magellan's most popular funds, such as the Magellan Global Fund (ASX: MGF), have been lagging behind their benchmark indexes for a while now. In the Magellan Global Fund's case, it has returned 9.9% over the year to 28 February, a good 8.25% below its MSCI World Index benchmark. Its unlisted equivalent also lags its benchmark index over the past 3, 5 and 7 years.

Then there was the dramatic departure of Magellan's co-founder and star stockpicker Hamish Douglass. Mr Douglass took a leave of absence for health reasons a few months ago amid revelations of his divorce. Another Magellan co-founder, Chris Mackay, has been brought in to fill Douglass' shoes. But after years of being the face of Magellan, there's little doubt his departure has shaken at least some investors' confidence.

Then there is the matter of what has become a sustained outflow of funds under management from Magellan. Over the past few months, the company has revealed an exodus of funds under management (FUM), from both retail and institutional investors. This included the largest institutional mandate Magellan had, that of St. James Place. Late last month, Magellan revealed an 11.37% drop in FUM between 11 February and 25 February.

All of this has likely combined to give investors the new lows we see in the Magellan share price today. No doubt investors will be hoping that the company finds a bottom soon.

The post Playing limbo… Magellan (ASX:MFG) share price hits 7-year low appeared first on The Motley Fool Australia.

Not a single sector in the green could be found on Friday afternoon. The best of the disastrous bunch were materials, benefiting from an influx of buying across gold miners. Still, the materials sector finished 0.17% lower, carrying the weight of underperforming iron ore producers. Meanwhile, the worst of the damage could be seen across the healthcare and tech sectors.

However, the question is: which shares delivered the biggest returns to investors on the ASX today? Here are the top ten stocks that came through for investors:

Top 10 ASX shares countdown today

Looking at the top 200 listed companies, Magellan Financial Group Ltd (ASX: MFG) was the biggest gainer today. Shares in the funds management company took flight, soaring 18.45% after reporting a better than expected first-half result. Find out more about Magellan Financial Group here.

The next biggest gaining ASX share today was Netwealth Group Ltd (ASX: NWL). The financial platform provider rallied 5.71% despite there being no announcements released today. Although, the company experienced a substantial fall in its share price two days earlier on its own half-year figures. Uncover the latest Netwealth Group details here.

Today's top 10 biggest gains were made in these ASX shares:

Our top 10 ASX shares today countdown is a recurring end-of-day summary to ensure you know which companies were making big moves on the day. Check-in at Fool.com.au after the market has closed during weekdays to see which stocks make the countdown.

The post Here are the top 10 ASX shares today appeared first on The Motley Fool Australia.

The fund manager is now down a depressing 78% from its all-time high of over $73 a share that we saw back in early 2020.

As we covered this morning, this dramatic slide seems to be the result of the announcement earlier today that Magellan's co-founder, chair and chief investment officer (CIO), Hamish Douglass, has "requested a period of medical leave to prioritise his health".

Mr Douglass has been under a lot of scrutiny over the past year or so as Magellan's flagship Magellan Global Fund (ASX: MGF) has struggled with chronic underperformance. The loss of the company's largest funds management mandate late last year, as well as news of Mr Douglass' divorce, hasn't helped matters.

But Magellan has brought in the big guns to account for the absence of Mr Douglass. Douglass' replacement, the company announced this morning, will be none other than Chris Mackay.

So who is Chris Mackay, and can he be the white knight that Magellan might need?

Magellan brings in Chris Mackay to fill Hamish Douglass' boots

Remember how we described Hamish Douglass as Magellan's co-founder? Well, Chris Mackay is his fellow Magellan co-founder. He also chaired Magellan, and acted as CIO, from its inception in 2006 until 2012.

Since then, he has chosen to concentrate his efforts towards managing MFF Capital Investments Ltd (ASX: MFF). MFF was the old Magellan Flagship Fund that has carved out its own path in recent years, despite the remaining links with Magellan. MFF Capital is a listed investment company (LIC) that invests in a similar fashion to some of Magellan's other funds. It also focuses primarily on the United States markets, and has companies like Amazon.com Inc (NASDAQ: AMZN) and Visa Inc (NYSE: V) among its largest holdings.

As my Fool colleague reported this morning, this won't be too difficult a transition considering Mackay's longstanding relationship with Magellan and since MFF and Magellan share office space.

Still, no doubt Magellan's shareholders will be hoping for an arguably much-needed fresh start.

At the current Magellan share price, the company has a market capitalisation of $3.43 billion, with a price-to-earnings (P/E) ratio of 12.7.

The post Who is Chris Mackay, Magellan's (ASX:MFG) new CIO? appeared first on The Motley Fool Australia.

• 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%.

The post Turning point? Magellan (ASX:MFG) posts market-beating fund returns for December appeared first on The Motley Fool Australia.

It also means that Magellan shares are now down around 35.4% year to date in 2021 so far, more than 45% over the past 12 months, and a depressing 53.5% off of the all-time high this company hit back in early 2020. Indeed, Magellan is now down close to 40% only since July.

Magellan used to be a much-beloved growth share, rising from around $23 a share in late 2018 to the all-time high of almost $74, back in February 2020. So what's gone so wrong for this company?

Why is the Magellan share price on struggle street?

Well, it could be a number of factors. Firstly, ASX brokers haven't exactly been showering this company with love lately. As my Fool colleague James probed last week, broker UBS has recently retained its 'sell' rating on Magellan, giving the fund manager a 12-month share price target of $29.50. UBS doesn't like the outflow of funds that the company has been experiencing in recent months, which puts pressure on the fees it can collect. It also cited the "ongoing underperformance of its global fund".

So that brings us to our second possible factor here. Magellan runs a stable of managed funds and actively-managed exchange-traded funds (ETFs). Some of these, such as the Magellan Global Fund (ASX: MGF) are some of the largest in the Australian market. However, many of Magellans's funds have indeed been struggling lately.

Let's look at the Magellan Global Fund. Its unlisted iteration has returned 8.48% over the past 12 months. In contrast, its benchmark MSCI World Net Total Return Index has returned 31.29% over the same period. It is also trailing this index's returns over the past 3, 5 and 7 years. Over the past 10, the Global Fund has returned an average of 16.67% per annum against the index's 16.14%.

Magellan's unlisted High Conviction Fund, which has an ASX-listed form in Magellan High Conviction Trust (ASX: MHHT), has delivered an average of 15.06% per annum since its inception in July 2013.

Investors know that if Magellan fails to deliver meaningful benchmark outperformance over a significant period, its investors might decide that a cheaper index-tracking ETF is a better bet. So this also might be weighing on investors minds as they send the Magellan share price towards its 52-week low.

Unless these performance metrics improve, it's possible that the Magellan share price could continue to struggle.

At today's closing Magellan share price, this company has a market capitalisation of $6.52 billion, with a dividend yield of 6.16%.

The post The Magellan (ASX:MFG) share price is now down 40% since July appeared first on The Motley Fool Australia.

So what's the latest from this ASX fund manager?

Well, this morning, we got Magellan's latest funds under management (FUM) figures. And they make for some interesting reading.

Magellan reported that its FUM as of 30 June 2021 stood at $113.9 billion. That's up 7.4% from the previous month's figure of $106.05 billion. This was made up of $30.88 billion in retail investor FUM. And $83.02 billion in institutional FUM. These figures were both up from last month's $23.03 billion and $77.02 billion respectively.

All of Magellan's fund groups experienced increases. But in pole position was Global Equities, which managed to grow from $79.33 billion of FUM in May to $85.44 billion by the end of June.

Additionally, Magellan informed investors that it had also experienced net outflows of $351 million for the quarter ending 30 June 2021. This means that the lion's share of the increase in FUM would have come from rising share markets and asset prices. These were clearly enough to overcome this net outflow of invested capital.

On a final note, the company also told the markets that it is entitled to collect approximately $30 million in performance fees for the 2021 financial year.

How are Magellan's funds performing?

Let's also take a quick look at how Magellan's funds are performing. The flagship Magellan Global Fund (ASX: MGF) is currently up 10.77% (as of 30 June) over the past 12 months. It (or its unlisted equivalent) has also averaged 13.21% per annum over the past 3 years, 14.37% over the past 5 and 11.92% since the fund's inception in 2007. Meanwhile, the Magellan High Conviction Fund, which is mirrored by the ASX listed Magellan High Conviction Trust (ASX: MHH), is up 17.38% over the past 12 months. It has averaged 12.09% over the past 3 years, 15.15% per annum over the past 5 and 15.03% since its inception in 2013.

The post Magellan (ASX:MFG) share price is see-sawing today appeared first on The Motley Fool Australia.

That puts them up more than 8.5% over the past 2 weeks, but still down 8% year to date. Over the past year, Magellan has also been a disappointing investment, losing 17.3% over 12 months.

But some news this week might have Magellan shareholders' hearts aflutter.

The fund manager has finally launched its long-promised retirement-focused product, which hit the share market just yesterday. It's known as 'Magellan FuturePay' and is listed on the Chi-X exchange under the ticker code 'FPAY'.

FuturePay is designed with a secure income stream in mind. It invests in a portfolio of global shares like Microsoft Corporation (NASDAQ: MSFT), Netflix Inc (NASDAQ: NFLX) and Visa Inc (NYSE: V) in a manner similar to the company's flagship Magellan Global Fund (ASX: MGF). However, it also targets a 4.2% distribution yield. This yield is paid out in monthly instalments and is designed to grow with inflation.

There are certainly some investors out there (such as retirees) who might not want to be in the share market. However, with interest rates at record lows, they are forced to turn to shares because of the paltry returns now offered by 'safe' investments like cash term deposits. It's these investors this kind of fund might appeal to.

FuturePay charges a management fee of 1% per annum, with no performance fees attached.

Since Magellan has been promoting this idea since at least 2019, many investors might be excited over its eventual launch this week. But is this new fund a gamechanger for Magellan?

Could Magellan shares be a post-FuturePay buy?

Well, one broker that is less than enchanted over Magellan's future is investment bank Goldman Sachs. According to CommSec, Goldman has reiterated its 'sell' position on Magellan shares in the wake of FuturePay's launch, with a 12-month price target of $47.97.

Goldman doesn't think FuturePay will be much of a gamechanger for Magellan amid a perceived lacklustre debut. It notes that its appeal to retirees may be tempered by a lack of capital preservation or income guarantees, and a structure "not without complexity". Goldman doesn't believe FuturePay will result in any meaningful impact on Magellan's bottom line in the immediate future.

The post Is Magellan's (ASX:MFG) new retirement fund a gamechanger? appeared first on The Motley Fool Australia.

Magellan is a major company in the ASX financials sector. It's also the largest funds management business on the ASX. But Magellan has not had a fantastic year or so. Over the past 12 months, the company has gone from around $58.50 per share to today's price (at the time of writing) of $47.80 – a slide of around 18%.

But let's talk May.

Magellan shares started last month at a price of $48.50. Yesterday, the company closed at $47.91. This means Magellan gave up 1.22% over the month. That doesn't look great when you compare it against the broader ASX 200. The index ended up putting on a healthy 1.9% gain for May, which included making a couple of all-time highs over the month. As such, the Magellan share price underperformed the index by more than 3% in May.

So why did Magellan undershoot the index?

Well, things didn't start out too well for the fund manager. As my Fool colleague James Mickleboro covered on 6 May, investment bank Goldman Sachs reiterated a 'sell' rating on Magellan with a 12-month price target of $47.97 per share. Not exactly what investors like to hear.

Negative broker attention seems to have weighed down some other, arguably more positive, announcements the company made over the month. The first of these was the funds under management (FUM) disclosure Magellan announced to the markets on 7 May for the month of April. Magellan told investors its total FUM as of 30 April was $110.43 billion, which was up a robust 4.1% from the $106.05 billion in March.

Then, on 27 May, we also got some much-awaited news out of Magellan regarding a new retirement-focused product – FuturePay. Incidentally, this is scheduled to launch on the ASX this week. FuturePay will invest in a global portfolio of shares, much like Magellan's flagship Magellan Global Fund (ASX: MGF). However, it will be targeting an initial yield of 4.3% per annum, which will be paid out monthly. It will also be adjusted over time for real returns over inflation.

But investors didn't seem to respond too enthusiastically to this announcement, or indeed Magellan's boost in FUM over April. At the current Magellan share price, the company has a market capitalisation of $8.78 billion, a price-to-earnings (P/E) ratio of 21.5 and a trailing dividend yield of 4.62%.

The post How did the Magellan (ASX:MFG) share price perform in May? appeared first on The Motley Fool Australia.

Over the past decade or so, these funds have become some of the most popular managed investments on the ASX.

Take the Magellan Global Fund (ASX: MGF). It's a globally focused fund that holds companies such as Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and Netflix Inc (NASDAQ: NFLX).

It targets both capital preservation and strong compounding returns. As of 30 April, it was worth a staggering $3.18 billion.

Historically, Magellan has been famous for this kind of fund. As far back as 2019, Magellan was flagging a retirement-focused product for its massive base of retail investors.

Until today, it had been very coy on what exactly this might be, only ruling out that it would be an annuity-style product.

But that could be about to change after Magellan finally revealed some details about its new retirement-focused product. An ASX release this morning sheds some light on this new offering.

A retirement fund?

According to the release, the new product will be known as 'FuturePay'.

Magellan didn't offer too much detail, instead spruiking that more information will be available at the product's official launch on 1 June.

But here's what Magellan CEO Brett Cains did say about the "upcoming retirement income-focused solution":

We are pleased to announce the launch of Magellan FuturePay. We believe it will help address the challenges faced by many investors and their advisers, particularly those dealing with the problem of establishing a retirement income.

This is an important topic and I look forward to discussing our approach in further detail at our upcoming launch event.

However, a report in the Australian Financial Review (AFR) this morning has some more details.

The AFR says the fund will target an initial yield of 4.3% per annum. This will be paid monthly to investors, which Magellan aims to adjust for inflation and grow over time.

Like most of Magellan's other funds, FuturePay will focus mostly on global equities. It will be able to divert profits in times of outperformance into a trust.

The fund will also reportedly be backed up with capital, and a loan facility capped at 2% of the fund's value, from Magellan's own balance sheet.

This structure will allow Magellan to smooth out its distribution payments over time, balancing out market gyrations.

It's also estimated the new FuturePay fund will list on Wednesday 2 June, just after the official launch. It will reportedly list on the Chi-X exchange under the ticker code 'FPAY'.

The fund will charge a management fee of 1% per annum.

About the Magellan share price

The Magellan share price has risen slightly on the back of this news.

Magellan Financial Group shares are up 0.48% at the time of writing, to $47.74. That's largely in line with the S&P/ASX 200 Index (ASX: XJO).

This share price gives Magellan a market capitalisation of $8.74 billion, a price-to-earnings (P/E) ratio of 21.56 and a trailing dividend yield of 4.61%.

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At the time of writing, the Magellan share price is down 0.7% to $46.76 per share.

Which alone is fairly uninteresting. But the news is paired with nearly two weeks of on-market purchases by Magellan's chair, chief investment officer, and lead portfolio manager – Hamish Douglass.  

Money where the mouth is

Over the last two weeks, Mr Douglass has loaded up on units in two of Magellan's listed investment funds. These funds are the Magellan Global Fund (ASX: MGF) and the Magellan High Conviction Trust (ASX: MHH), both of which he manages.

It certainly instils confidence in investors when a portfolio manager is practising what they preach. Prior to the recent splurge, Mr Douglass was already a top shareholder in both funds.

So, just how much has he gobbled up? Well, I took the liberty of adding it all up. Across 10 days of purchasing, the respected investment manager has bought $3.19 million worth of units.

Additionally, the split between the funds was $1.72 million in the Global Fund and $1.47 million in the High Conviction Trust. Such numbers sound like big positions (they are), but it only represents roughly a 5% lift in his prior holding.

Buying while Magellan underperforms ASX

It seems Hamish Douglass is following the great Warren Buffett's mantra: "Be fearful when others are greedy and be greedy when others are fearful." The value of units in both funds has substantially underperformed the market over the last year.

The Magellan Global Fund has lost 6% over the past 12 months. A repercussion of half the fund's portfolio held in cash and defensive equities. That positioning held back gains from its top holdings such as Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOG), and Facebook Inc (NASDAQ: FB).

On the positive side, with the recent tech sell-off, Magellan is well-capitalised to load up on some growth companies at a discounted rate. This is exactly what other investors are doing, based on Magellan's FUM for April.

Most of the $4.373 billion added in the last month went towards Magellan's global equities. Nearly $3.6 billion went into the group's global equity investments.

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But Magellan has not recovered nearly as well from the coronavirus pandemic as the S&P/ASx 200 Index (ASX: XJO) has since. As it stands today (at the time of writing), Magellan shares are trading for $47.58. That's a good 35% off of those February 2020 highs, and more than 27% below what the company was trading for back in August last year.

The Magellan share price seems to be going sideways.

So what happened to this ASX share? Magellan used to be loved for its leveraged exposure to the ASX and the US markets, considering its funds' management nature.

Fund managers are actually a relatively simple business to understand. They make money in two ways – by increasing funds under management (FUM) and by delivering market performance, preferably outperformance.

Let's look at Magellan's FUM first then.

Fee fi fo FUM

Magellan's FUM has remained remarkably consistent over the past 18 months. Back in February 2020, Magellan told the markets that, as of 31 January 2020, it had $104.31 billion in FUM. As we discussed last week, Magellan reported FUM of $106.05 billion as of 31 March 2021. That's a pretty solid, if not overly inspiring, comparison there. It indicates that Magellan's investors held their faith in the company's funds over the significant market volatility and turmoil we saw last year.

So let's now turn to the performance of Magellan's funds themselves to see how they measure up. This company has long been able to attract investors with its focus on the US markets. And its ability to deliver market-beating returns, of course.

What about Magellan's returns?

So, let's first look at Magellan's flagship Global Fund, of which there is a listed version in the Magellan Global Fund (ASX: MGF). According to Magellan, the Global Fund has returned 4.52% over the past 12 months (as of 31 March 2021) after fees. It has averaged 13% per annum over the past 3 years, 12.57% per annum over the past 5 and 15.88% over the past 10.

By comparison, the MSCI World Net Total Return Index (AUD), which is the benchmark Magellan follows, has delivered 23.78% over the 12 months, 13.08% per annum over the past 3 years, 13.58% over the past 5, and 12.85% over the past 10.

In other words, the Magellan Global Fund has mirrored or underperformed its index. The past year has been especially damaging to the company's longer-term performance metrics, given that 13%+ underperformance.

Magellan's High Conviction strategy, used in both a managed fund and its listed equivalent, the Magellan High Conviction Trust (ASX: MHH), has not fared much better. It has delivered 13.18% over the past year (again, as of 31 March). But 11.04% on average over 3 years, and 12.08% over the past 5.

By comparison, investing in a simple S&P 500 Index (INDEXSP: .INX) fund, like the iShares S&P 500 ETF (ASX: IVV), would have gotten an investor 25.4% over the past year, 16.7% per annum over the past 3 years, 16.3% over 5, and 17.3% over 10.

Plus, this exchange-traded fund (ETF) charges a management fee of just 0.04%. Compare that with Magellan Global Fund's 1.35% fee, or the High Conviction fee of 1.5%.

Investors don't usually like paying large management fees if the fund in question doesn't justify said fee through index outperformance. This is likely to be what is weighing on the Magellan share price over the past few months.

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RBA's justification for holding rates

As outlined in the statement provided by RBA Governor Philip Lowe, the global economy is now in a more promising position than it was a few months ago. The ongoing rollout of vaccines is creating less uncertainty looking forward.

Governor Lowe also acknowledged the increase in global trade and commodity prices. However, the recovery remains highly contingent on COVID-19 and global monetary support.

The improving unemployment rate and increased spending also indicate a strengthening economy for Australia. Lowe also expects the recovery to continue, enabling gross domestic product (GDP) to return to pre-COVID levels by the middle of this year.

On the flip side of the coin, wages and pricing are expected to remain dampened. Governor Lowe provided further comments on wages and the job market:

Further progress in reducing spare capacity is expected, but it will be some time before the labour market is tight enough to generate wage increases that are consistent with achieving the inflation target. In the central scenario, the unemployment rate will still be around 6% at the end of this year and 5.5% at the end of 2022.

The continued low rate environment has aided in a booming property market. In February, property values experienced their fastest growth in 17 years, as reported by The Australian Financial Review. This illustrates the tight rope the RBA is attempting to walk. On one side it is trying to provide liquidity to markets to avoid collapse. While on the other hand, it is attempting to hold rates down to postpone an increase in financing costs.

Buying bonds like it's going out of fashion

The RBA clarified it maintains its current $200 billion bond-buying quantitative easing program. This comes after the RBA recently provided additional liquidity to the bond market to assist with proper functioning during a sell-off.  The concern with bonds selling off is the declining price results in a higher yield. As a result, the 10-year bond yield shot up to 1.95%.

To ensure that the real rates yield conformed to the RBA's intended low rates, the central bank doubled down on Monday. This resulted in the purchase of $4 billion worth of bonds. 

Further comments in Governor Lowe's statement indicated that the bank would be prepared to make further adjustments as needed. Bond yields swiftly jumped following the statement yesterday afternoon.

Bond yields rise in response to RBA suggesting it could do more… pic.twitter.com/3NZwMSWyua

— Alex Joiner (@IFM_Economist) March 2, 2021

Astoundingly, by the end of August, the central bank is expected to hold $221 billion in bonds. This would represent around 25% of the total outstanding bond market.

Rising rates could hit shares hard

As we reported earlier this morning, billionaire investor and head of Magellan Global Fund (ASX: MGF), Hamish Douglass, voiced his concerns about rising rates. The gist of Mr Douglass's concerns centres around the market having priced in record-low rates for a long time. 

That fact is, with near-zero returns from the cash market, many investors have shovelled their funds into the share market. If rates were to rise, the willingness to pay historically high earnings multiples for shares would likely diminish. In plain terms, it wouldn't be pretty. Mr Douglass provided cautionary by commenting, "If you raise interest rates to head off a real inflation threat, then hang on to your chairs."

However, the RBA remains steadfast that real rates won't be allowed to rise until 2024.

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Hamish Douglass webinar

In a webinar yesterday, entitled 'Global equities: The year of living dangerously', Mr Douglass gave his latest thoughts about the share market, inflation, interest rates and other topics.

As a build up to the webinar, the following questions were part of the advertising for the event: "With a backdrop of emerging viral mutations, vast global fiscal stimulus, zero interest rates and possible pressures on inflation numbers entering the view finder, how is risk being priced? Was November's stunning market rally a one-off? How do we see 2021 panning out? With these issues currently at play, markets appear complex, even dangerous."

The Australian Financial Review reported that he said that share markets could face a "huge reckoning" if inflation causes central banks to increase interest rates which would be a disaster, according to Mr Douglass.

The AFR quoted Mr Douglass saying:

Interest rates are close to zero [and] asset prices are very high, reflecting low interest rates. If you raise interest rates to head off a real inflation threat, then hang on to your chairs.

If I have to take a view I think this will be transitory, the fiscal stimulus will pass through the economy, and then we are going to be looking back into a factual situation of lower long-term structural economic growth.

But I do think that the bond market is going to be very volatile through the rest of this year. People know that bond rates have gone up.

Interest rates aren't the only thing on Mr Douglass' mind right now. You've probably read about how a subreddit on Reddit called wallstreetbets, which is essentially a forum for people discussing shares, decided to heavily invest in the US gaming retailer called GameStop Corp (NYSE: GME). The share price has been very volatile since then. 

Mr Douglass said that the amount of people who were essentially gambling on GameStop, with no relation to investment principles, scared him. The more people that did it, the more it worries him about how it could end and unwind.

How is Mr Douglass positioning the portfolios?

What is one of Australia's most famous investors doing with all of the above in mind?

He's not afraid of going having cash, sometimes the portfolio has had a cash position of more than 10%. At the end of January 2021 the Magellan Global Fund had a cash position of 7% of the portfolio. In the webinar he said that the portfolio is currently 96% invested.

However, the Magellan Global Fund has investments in a number of consumer staples and utilities which Mr Douglass claims would very likely be resilient if there's elevated levels of inflation.

At the end of December 2020, it had names in the portfolio like Starbucks, Reckitt Benckiser, PepsiCo, Nestle, Yum! Brands, McDonalds, Estee Lauder and LVMH (Moet Hennessy Louis Vuitton).

Only time what is going to happen with inflation, interest rates and the share market.

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With such a surprisingly good year for investors, many are now turning to 2021 and hoping for at least 'more of the same'.

However, one ASX fund manager isn't too excited that those investors will get what they wish for.

Top ASX fundie weighs in

Hamish Douglass is the co-founder and chief investment officer of Magellan Financial Group Ltd (ASX: MFG). He is regarded as one of the best fund managers in the country. This is evidenced by Magellan's current market capitalisation of $8.8 billion, with more than $100 billion in assets under management. Mr Douglass' significant stake in Magellan makes him a billionaire. The size of Magellan is largely built on its consistent track record of performance. The company's flagship Magellan Global Fund (ASX: MGF) has returned an average of 15.56% per annum over the past 10 years.

So Mr Douglass is evidently someone who many ASX investors pay attention to.

According to a report in the Australian Financial Review (AFR), Mr Douglass is a little worried about the current state of global markets. He suggests to the AFR that the gains that markets have experienced in the past few months are motivated by a dangerous "fear of missing out [FOMO]", and that he feels that the majority of investor sentiment right now "remains worryingly bullish… which is out of step with the economic and scientific reality of the pandemic".

He notes the "positive developments" and "'best possible scenario' outcome" of the recent success of several COVID-19 vaccination candidates. Together with the results of the recent US elections, this has been a "nirvana outcome" for investors. Even so, Douglass is still recommending caution:

This pandemic, which I would argue is still going on, is an issue of scientific complexity that the market seems to be somewhat oblivious of in terms of the risks still in front of us… We've been much more worried about downside protection than upside.

"We don't bet big on vaccine trials"

The report notes that many of Magellan's funds have not outperformed their benchmark indices over the past few months. Over the period, Magellan's Global Equity Strategy held roughly 50% of its assets in cash at times. Also augmented by "very high-quality defensive equities". That was deliberately opposed to holding "growth stocks". However, Mr Douglass remains unapologetic, stating:

We're never going to bet big on [vaccine trials]. When you have a bias built in to protect capital, you're not going to participate in a very discretionary-led rally like this. You would expect us to lag a one in 50-year rally like this.

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If you dig a little deeper in your own cupboard, you might find Kellogg Company (NYSE: K) cereal or razors made by Procter & Gamble Co's (NYSE: PG) Gillette.

American companies are everywhere in Australian life, often hiding under familiar brands. Take the popular ice creams Paddle Pop and Golden Gaytime. They are actually owned by the British-Dutch company Unilever UN (NYSE: UL), listed in the US.

So it's understandable that Aussie investors might want a slice of the pie. And they do. You can take a look at our coverage of some of the most popular US shares that Aussie are buying.

Recently, we covered how the rising Australian dollar was making investing in US shares more attractive. So if you've never taken the plunge across the Pacific, it might be a good time to have a think about it. There's nothing wrong with our own S&P/ASX 200 Index (ASX: XJO) of course. But the reality is that our market is a minnow in the ocean of global markets. The US markets are, by comparison, a pod of whales. I say a pod because the US has a few different markets you can invest in. Rather than just one major index, like our ASX 200, American investors have a few choices. There's the old-school Dow Jones Industrial Average (INDEXDJX: .DJI), the uber-popular S&P 500 Index (INDEXSP: .INX), and the tech-heavy NASDAQ-100 (INDEXNASDAQ: NDX).

Buying US shares on the ASX

You can always buy US shares directly through your ordinary broker. Many of the most popular Aussie share brokers, like Commonwealth Bank of Australia's (ASX: CBA) CommSec, or National Australia Bank Ltd's (ASX: NAB) NABtrade offer the opportunity to buy US shares like Apple or Netflix directly. There are also newer dedicated US brokers, like the popular Stake, which do the same.

However, if you don't want to buy these shares directly, there are other options. Various managed funds and Listed Investment Companies (LICs) that are listed on the ASX invest in US shares. Some popular examples include the Magellan Global Fund (ASX: MGF) and MFF Captial Investments Ltd (ASX: MFF).

Otherwise, there are always US market-tracking index funds available on the ASX as well. Some examples include the iShares S&P 500 ETF (ASX: IVV), the Vanguard US Total Market Shares Index ETF (ASX: VTS), and the BetaShares Nasdaq 100 ETF (ASX: NDQ). There's also a couple of currency-hedged options for the investor who wants to take currency fluctuations out of the equation. These include the iShares S&P 500 AUD Hedged ETF (ASX: IHVV) and the BetaShares NASDAQ 100 ETF – Currency Hedged (ASX: HNDQ).

Foolish takeaway

For the investor who wants to branch out and invest in US shares, there are more options available than ever. In the end, it just depends on your individual preferences as to which route you wish to take.

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Over the past two years or so, Magellan shares have appreciated by almost 120%, turning Magellan co-founder and chief investment officer Hamish Douglass into a billionaire.

Magellan has successfully tapped into an appetite in the Australian investor for access to some of the best companies in the world outside the ASX.

Magellan's flagship Global Fund has returned an average of 15.67% per annum over the past decade. That has clearly turned heads given that this fund (across both its listed and unlisted offerings) has more than $15 billion in assets under management alone.

But Magellan has been busy in recent months. It has just completed an amalgamation of some of its listed and unlisted funds into single entities. That's why investors can now choose to buy open-ended managed fund units directly from Magellan or on the ASX, or closed-ended shares just on the ASX. As an example, the Global Fund now trades on the share market as Magellan Global Fund (ASX: MGF), as well as Magellan Global Fund Open Class (ASX: MGOC).

Magellan launches new 'Core' ETFs

But we got some more exciting news from Magellan today. The company has announced it is launching a new series of exchange-traded funds (ETFs), most of them under a new 'Core' brand. These funds aren't listed on the ASX, but rather on Chi-X, an alternative share market to the ASX in Australia.

These new funds (and ticker symbols) are as follows;

• MFG Core International Fund (CXA: MCSG)
• MFG Core ESG Fund (CXA: MCSE)
• MFG Core Infrastructure Fund (CXA: MCSI)
• Magellan Sustainable Fund (CXA: MSUF)

You might notice that the last one stands out. The Magellan Sustainable Fund is not part of this 'Core' series, but rather an actively managed fund dedicated to ethical investing. It will set investors back with a management fee of 1.35% per annum.

But turning back to this 'Core' series, the idea is that these ETFs provide a broader and less 'active' approach than Magellan's existing funds. For one, instead of Magellan's standard fee of 1.35% per annum (which applies to the Global Fund), these ETFs will only charge 0.5% per annum.

Additionally, each fund will reportedly hold between 70 and 90 companies (70 to 100 for the Infrastructure Fund). By comparison, the Global Fund aims for between 20 and 40, and Magellan's High Conviction Trust (ASX: MHH) holds just 8 to 12. The Global Fund also has the mandate to keep between 0% and 20% of its value in cash (the High Conviction Trust aims for between 0% to 50%). Meanwhile, the Core funds have a maximum of 10% cash (5% for the Infrastructure Fund), with "an aim to be fully invested".

Why this new range?

The reason for this new range? Magellan CEO Brett Cairns had this to say:

The MFG Core Series has been under development for several years and extends the successful approach that has been applied by our institutional Core Infrastructure Fund and mandates for the past 10 years. This approach actively constructs diversified portfolios of high-quality companies leveraging Magellan's research, and manages them using a proprietary process…

We believe the series provides an attractive lower cost alternative for those wishing to gain an exposure to Magellan's research and investment expertise but are not necessarily seeking our full actively managed portfolio services. We have also had considerable interest from retail investors and advisers in making our sustainable investment strategy available to the retail market in Australia.

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