International equities manager Magellan Financial Group Ltd (ASX: MFG) yesterday announced it saw net fund inflows of $777 million in November. As at November 28 total funds under management were more than $30 billion.
In response the stock has lifted more than 6% over two days to hit a record high of more than $16 today. Magellan's meteoric rise has been based on impressive investment performance and a rapid growth in funds under management.
Institutional business development is a key growth driver for Magellan and November saw more success with institutional inflows of $726 million. More than two thirds of the group's total funds under management is institutional money.
For small-to-medium-sized fund managers institutional business development is potentially lucrative, but the space is highly competitive with fund managers globally all fighting for a slice of the action.
One of Magellan's main rivals in Australia is Platinum Asset Management Limited (ASX: PTM), while Perpetual Limited (ASX: PPT) has also now woken up to the potential of the international equities space.
The fund managers that tend to consistently win the most new business have strong sales teams and top ranking investment products. This combination can create a growth sweet spot made all the juicier by rising equity markets.
Important in impressing the institutions and their consultants is a strong track record of past investment performance to highlight the strengths of investment teams.
Chief executive and gun fund manager Hamish Douglass manages almost $6 billion in the Magellan Global Fund, which has a blue-chip focus and impressive outperformance record over the long term sure to impress institutional investors.
Mr. Douglass is a known fan of Warren Buffett and would have shared the pain over the recent shocking share price performance of UK supermarket giant Tesco PLC (LON: TSCO). Magellan also operates an ASX-listed fund the Magellan Flagship Fund Limited (ASX: MFF), which has delivered impressive returns in recent years.
The distribution business is headed up by ex-Colonial First State grandee Frank Casarotti, who has also achieved consistent success in cranking the fund inflows from retail investors.
Much of Magellan's revenues are derived as a proportion of funds under management so it's naturally leveraged to the strength or weakness of global equity markets. Provided they remain reasonably resilient there's little to suggest it cannot continue to perform well into the future.
