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