Is Magellan's (ASX:MFG) new retirement fund a gamechanger?

Magellan's new retirement-focused product is under the spotlight.

| More on:
old people considering retirement funds

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Magellan Financial Group Ltd (ASX: MFG) share price is having a pretty decent day today. Magellan shares are up 1.69% at the time of writing to $48.82 each.

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.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen owns shares of Visa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Microsoft, Netflix, and Visa. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Financial Shares

Woman and man calculating a dividend yield.
Financial Shares

Australian insurance sector: Does Macquarie prefer IAG or Suncorp shares?

Here’s an expert’s views on the insurance sector.

Read more »

A woman sits on a chair smiling as she shops online.
Financial Shares

Which ASX 200 financial share delivered better returns in FY25: IAG, AMP, or Zip?

We compare share price movements and dividend payments for these 3 ASX 200 financial stocks.

Read more »

a man sits in unhappy contemplation staring at his computer on his desk in a home environment, propping his chin on his hand.
Financial Shares

Did Suncorp or QBE insurance shares perform better in the last year?

These insurance providers brought solid returns for investors in the last 12 months. 

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Financial Shares

Up 58% since April, this ASX 200 financial stock just reported record results

The ASX 200 wealth management and technology company has been on a tear since April. Here’s the latest.

Read more »

A young woman smiles as she rides a zip line high above the trees.
Financial Shares

5 best ASX 200 financial shares of FY25 (CBA didn't make the cut!)

These stocks were well and truly 'in the black' for share price growth last financial year.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Financial Shares

Does Macquarie rate IAG Insurance shares a buy, hold or sell?

The insurer's share price has slumped this week.

Read more »

Worried woman calculating domestic bills.
Financial Shares

What's the outlook for household deposit growth for the big 4 banks?

Household deposit growth has accelerated over the past two years.

Read more »

A man looking at his laptop and thinking.
Broker Notes

After crashing more than 21% yesterday, does Macquarie rate Helia shares a buy?

Should I buy the big dip on Helia shares? Here’s Macquarie’s latest share price forecast.

Read more »