The first article I wrote in 2023 was titled “Is the pessimism engulfing Magellan overdone?” Two years later, and with the benefit of hindsight, the answer to that question was probably ‘yes’ although the premise was reached a bit prematurely. At the time the share price was $8.73 having plunged from its high above $72 in February 2020. It continued to slide, reaching a low point of $6.22 in October 2023, a total fall of 91%.
Many investors (self included) were badly burnt during this fall from grace. The tendency is to then think ‘I will never touch that stock again.’ But this inbuilt bias may blind us to the potential future opportunities. The reality is the Magellan of today is a very different business to the Magellan of old.
Hamish Douglass used to shun turnarounds, preferring to invest in strongly performing business rather than take the risk of investing in a turnaround, which, as he put it, often fail to turn. Now the business he founded is in the midst of a turnaround with a whole new team at the helm.
The strategy at Magellan Financial (ASX:MFG) has undergone major changes, but it is still primarily a fund manager. So like all fund managers, revenue is driven by funds under management (FUM). Magellan’s FUM peaked at $116.4 billion in November 2021. Today it is $39.1 billion. But the good news is the trajectory has changed. FUM bottomed out at $34.3 billion in October 2023, the same month the share price bottomed, and has been steadily rising since. It has risen 11% in the last year.
The rise in FUM has been largely a result of positive performance. The exodus in funds has slowed right down but they are still experiencing net outflows rather than inflows.
Another big change has been the spread of FUM over different asset classes. Magellan was known primarily as a global equities manager. Today their largest asset class is Infrastructure Equities as shown in the table below and the breakdown is more balanced across the three asset classes.
Funds under management breakdown
Nov 2021 | Nov 2024 | |
Global Equities | 74% | 37% |
Infrastructure Equities | 18% | 43% |
Australian Equities | 8% | 20% |
There have also been big changes in the leadership team. The departures of CEO Brett Cairns and founder and Chief Investment Officer Hamish…
