War on funds: What's going on with Magellan shares and other ASX-listed fund managers?

Magellan and other fund managers are not having much 'FUM' lately…

| More on:
Group of thoughtful business people with eyeglasses reading documents in the office.

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

Key points

  • The Magellan share price has fallen 36% this year to date
  • The fund manager has seen its funds under management fall from $116 billion to $65 billion as macroeconomic conditions bite
  • Fellow fund manager Platinum Asset Management has also suffered a drop in FUM

The dreaded 'I' word has done the rounds in financial markets since the beginning of the year, steamrolling any equity daring enough to stand in its way. In the process, shares in Magellan Financial Group Ltd (ASX: MFG) and other fund managers on the ASX have felt the sting of inflation.

However, investors could be in for more pain as a 40-year high in US inflation increases the chances of the Federal Reserve hiking rates by a sizeable 75 basis points.

The expectation for higher interest rates means more market participants are opting to watch how this pans out from the sidelines while holding cash. In light of this, fund managers are more and more becoming FUD (fear, uncertainty, and doubt) managers.

Let's take a look at how this battle has impacted Magellan and other fund manager shares recently.

Fund flood gates wide open

For Magellan shares, the pain began with the loss of its contract with St James's Place back in December last year. Prior to this, the ASX-listed fund manager counted more than $116 billion in funds under management (FUM).

Fast forward to the end of May this year, and Magellan is looking at a total FUM of $65 billion. That is nearly a slicing in half of the company's former glory. Consequently, Magellan shares have similarly fallen away, tumbling 36% year-to-date.

The once-admired fund has struggled to retain investors' money amid the challenging macroeconomic conditions. Not to mention the difficulty in enticing new investors while many of its managed funds underperform benchmarks. For example, the Magellan Global Fund (hedged) has provided lesser returns than the MSCI World Net Total Return Index over a one-year, three-year, five-year, and seven-year period.

Fellow ASX-listed fund manager Platinum Asset Management Ltd (ASX: PTM) has also suffered at the hand of fund outflows. After entering the new year with a tidy sum of $22 billion in FUM, Platinum now only has $19.6 billion under its belt.

Ultimately, the reductions in funds under management directly impact the company's bottom line. In the fund management business, revenue is a percentage fee of the total FUM. As you can see, these companies have an uphill battle to stem the outflows.

Doing better than Magellan shares

One ASX-listed fund manager that appears to be fending off high-interest rate fears is GQG Partners Inc (ASX: GQG). The US-based global boutique asset management firm has experienced a net inflow of funds since the end of last year.

According to the latest FUM report, GQG Partners held $94.6 billion, up from December's $91.2 billion. Part of the reason might be GQG's outperformance compared to benchmarks over the last few years. Furthermore, growth in the company's FUM has served up increased revenue over the past 12 months.

As covered by my colleague Sebastian, it is believed that Magellan shares will continue to reel in pain until its own performance figures improve.

Motley Fool contributor Mitchell Lawler 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.

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 »