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The Magellan (ASX:MFG) share price dropped in November 2021. Here’s what happened

Magellan shares fell in November 2021.
The post The Magellan (ASX:MFG) share price dropped in November 2021. Here’s what happened appeared first on The Motley Fool Australia. –

The Magellan Financial Group Ltd (ASX: MFG) share price saw a decline in November 2021.

Magellan shares fell around 4% as the business continues to drift lower.

Since the start of FY22 (being July 2021), the Magellan share price has actually fallen by around 40%.

What’s happening to the Magellan share price?

Funds management businesses share prices sometimes follow the movement of the broader share market.

For example, today Magellan shares are down around 2% amid more comments from the US Federal Reserve. The Federal Reserve Chair Jerome Powell is not going to describe the current elevated inflation situation as “transitory” any more. With that in mind, the US Fed is going to slow down its purchases of assets quicker. Asset buying can be supportive of asset markets, like shares.

Investors are also coming to terms with the thought that vaccines may not be quite as effective against the new Omicron COVID-19 variant.

But that’s what is happening right now. What about November and the last few months?

Funds under management (FUM) and performance difficulties

Investors, analysts and brokers pay close attention to Magellan’s FUM movements. Investment fund performance also dictates whether the manager can earn performance fees.

In its update regarding the quarter to 30 September 2021, Magellan said it experienced net outflows of $1.53 billion, which was approximately 1.3% of average FUM over the quarter. This comprised net retail outflows of $617 million and net institutional outflows of $910 million. FUM movements can have an impact on the Magellan share price.

In regards to the net institutional outflows, $1 billion of outflows were the result of three clients rebalancing their portfolios across global equities ($410 million), infrastructure equities ($410 million) and Australian equities ($180 million). But, all three clients were retained, each with mandates of more than $2 billion with Magellan.

No institutional mandates were lost during that quarter. The global sustainable strategy secured its first mandates during the quarter.

In the latest monthly FUM update for October 2021, FUM increased $1.5 billion to $114.8 billion.

Some of Magellan’s main funds has been underperforming its benchmark. For example, the Magellan Global Fund (Open Class) (ASX: MGOC) had underperformed the MSCI World Net Total Return Index (AUD) by 22.8% over the prior year at 31 October 2021.

Analyst thoughts on the Magellan share price

Brokers at Macquarie Group Ltd (ASX: MQG) currently rate Magellan as a buy, with a price target of $38.

The broker acknowledged that the fund manager now wasn’t as highly valued by investors with its recent underperformance and said net flows may not improve over the rest of this financial year.

However, Macquarie thinks that Magellan shares now look attractive and offer a nice prospective dividend yield.

The Magellan share price is priced at 12x FY23’s estimated earnings with an estimated partially franked dividend yield of 7.5% for that financial year.

The post The Magellan (ASX:MFG) share price dropped in November 2021. Here’s what happened appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison owns shares of Magellan Financial Group. 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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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