MFG - Magellan Financial Group

[Dona Ferentes]

Magellan Financial Group has blamed portfolio rebalancing from three of its clients for a more than $4 billion fall in funds under management in September. Retail FUM fell 4.9 per cent to $29.97 billion while institutional FUM dipped 3.6 per cent tot $83.33 billion.

The fall was led by a $4 billion fall in global equities funds under management, while there were smaller declines in infrastructure and Australian equities.

The group experienced net outflows of $1.5 billion, comprising net retail outflows of $617 million and net institutional outflows of $910 million.

The group said $1 billion of outflows were the result of three clients rebalancing their portfolios across global equities, infrastructure equities, and Australian equities. All three clients were retained, each with mandates in excess of $2 billion with Magellan at September 30.

It also said approximately 23 per cent of net retail outflows related to redemptions from Magellan High Conviction Trust (MHHT) following the decision to open the fund as an Active ETF.

 

[finicky]

Not a chart that I could buy, monthly candles breaking the falling lower BB - could be significantly worse in store given the apparent break of $30. Price down at the March 20 Wuhan low. WTH is going on? Could it be a bellwether stock?

Maybe the headline I saw (but didn't read on) " the crash has already begun you just don't know it yet". A few, maybe a lot of insiders are cashing up I've read: like that Tesla guy and his brother, Berkshire is holding record buckets of cash and buying its own stock.

MFG Funds under Management only just keeping up Nov vs Oct but aided by AUD/USD and bounce in some holdings. Funds are increasingly outflowing I read - but not verified.
Don't like the big tech U.S tech companies like FB or the Chinese stocks their global fund has dabbled in.
Certainly one I would consider in a crash if Hamish Douglass is still there.

Decade Monthly

 

[Dona Ferentes]

the big news for MFG is the CEO resignation. Described as sudden, and communications from the Co as terse,

[Brett Cairns announced his resignation] less than three weeks after he fronted the annual general meeting and delivered a strident defence of the company’s growth prospects and its “deep and long-standing relationships” with its 130 institutional clients, its huge networks of financial planners and 120,000 retail investors....

But Magellan, which held an all-staff meeting at 9.30am AEDT on Tuesday, has declined to expand on the terse announcement that accompanied Cairn’s departure.

Magellan shares fell 4 per cent on Monday before Cairns’ departure hit the boards at about 6pm. By lunchtime on Tuesday, the stock had fallen a further 4.1 per cent to sit below $30 for the first time since February 2019. The stock has now lost 46 per cent since July 1, and 48 per cent in the last 12 months.

The key concern is around Magellan’s performance and how that is flowing through to fund flows. Hours before Cairns’ resignation was announced, Magellan released its November funds under management update, which showed total FUM sat at $116.4 billion, up from $114.8 billion a month earlier and $103 billion in November 2020.

 

[CityIndex]

Magellan is leading the ASX200 lower today after downgrading guidance for their annual revenue and losing their largest major contract.

Earlier this morning, Magellan confirmed that St. James’s Place had terminated their mandate with company; a partnership that accounted for approximately 12% of their revenue. This has only made things worse for what has already been a torrid 2021 for the company. Their main fund has significantly underperformed its benchmarks this year, and the CEO also left the firm earlier this month, with Magellan stating it was due to personal reasons.

$MFG is now down nearly 60% YTD, trading at 5-year lows with an extremely oversold reading on the daily RSI. Can the stock, and company, turn things around from here, or are they in for another difficult year in 2022?

 

[divs4ever]

the joys of 'key person ' risk , it might sound like i am gloating but have been scorched elsewhere by the same problem ( a key personality leaving or dying )

take care ( but there still MIGHT be opportunity )

( i have never held this share )

 

[Garpal Gumnut]

Magellan is leading the ASX200 lower today after downgrading guidance for their annual revenue and losing their largest major contract.

Earlier this morning, Magellan confirmed that St. James’s Place had terminated their mandate with company; a partnership that accounted for approximately 12% of their revenue. This has only made things worse for what has already been a torrid 2021 for the company. Their main fund has significantly underperformed its benchmarks this year, and the CEO also left the firm earlier this month, with Magellan stating it was due to personal reasons.

$MFG is now down nearly 60% YTD, trading at 5-year lows with an extremely oversold reading on the daily RSI. Can the stock, and company, turn things around from here, or are they in for another difficult year in 2022?

MGF has not all but many of the hallmarks of AMP.

It has been a one man band with a paid drummer who has decided to jump ship.
The lead singer has split seemingly from his missus. It must have been one hell of a marriage as it merited an ASX announcement.

The lead singer has been playing bagpipes louder and louder to a boy band crowd and the hall is emptying.

At the rate of descent in price and poor judgement calls over many time periods, this little piglet could trade under $10 quite soon.

Then one is getting close to AMP territory which an Uber driver told me last night has been trading at 90c.

gg

 

[Garpal Gumnut]

MGF appears to be doing a very good impression of what the French call so eloquently :

Rebond de chat mort

gg

 

[divs4ever]

MGF has not all but many of the hallmarks of AMP.

It has been a one man band with a paid drummer who has decided to jump ship.
The lead singer has split seemingly from his missus. It must have been one hell of a marriage as it merited an ASX announcement.

The lead singer has been playing bagpipes louder and louder to a boy band crowd and the hall is emptying.

At the rate of descent in price and poor judgement calls over many time periods, this little piglet could trade under $10 quite soon.

Then one is getting close to AMP territory which an Uber driver told me last night has been trading at 90c.

gg

depends on who the missus is ( i rarely follow such matters ) some of those women are power-houses in their own right , for example she might mix with half the rich wives and royalty around the world

i remember we had a PM not so long back , whose wife was highly respected as a company director

but trading with AMP maybe IF you have quick reflexes

to be honest i don't think this whole sector is a good place to throw good INVESTING money , currently , not only do you have the internal company stuff , but those regulators/policy-makers thinking they can look useful tweaking this sector a little more

all that under-performance/over-performance gobble-de-gook it was bad enough trying to gauge benchmarks before the reforms

but i bet they won't standardize .. say a choice between XJO , or XAO as bench-marks ( and no fancy tweaks , like inflation-adjusted , or total returns etc etc ) let the investor work that out for themselves if they wish to .

however , 'smart money ' MIGHT be rushing for the sidelines and MGF is the canary in the coal-mine

 

[MatttSAU2XR8]

Hey guys,

Not sure if this was a good idea or not but just bought some MFG at $20.55, unfortunately wasn't quick enough to get in at $19.50ish earlier in the day. Interested in anyone's thoughts on risk/benefit in hanging onto them?

From what I can see:
- Financials industry is overall not doing so well recently, eg. AMP
- MFG has fallen a LOT in the last year
- But underlying EPS and DPS has hovered around $2.30 and $2.10 per share for the last few years, so was it more a case if price being overbid, than the underyling business changing a lot?
- Big fall a few days back, over 30 %. But if the loss of the St James client drops earnings by around 12 %, or call it 15 % to be pessimistic, then might still expect EPS and DPS to be around $1.95 and $1.78 respectively
- So at a price of $20.55 dividend return around 8.5 % and even if price were to rebound quickly to around $24 return would still be around 7.5 %
- So if held for a year and no more major problems a return of 8.5 % via dividend and 16 % via capital gain. Which after tax would be about 18 %....

On a related note Simply Wall Street seem to like them and Morningstar seem to like them and Morningstar (via ANZ) seem to currently be suggesting a PE of 8. Not sure whether to really put much stock in their thoughts though...?

 

[divs4ever]

a rapidly falling SP and a low PE USUALLY scares buyers away ( except some big predatory fund managers , but some of them might be on holidays )

this situation is tricky it isn't a reputation smash like AMP or IFL , but MAYBE more clients are thinking of departing or reducing investment capital ( for various reasons )

are funds under management going to continue a share decline ( i don't know the answer to that )

will the remaining management take this as a wake-up call , try something better

OR will a bigger player decide to swallow this up ( because let's face it the brand is only tarnished a little , not completely trashed )

i would suggest a 'merger of equals ' but who with there are several worse , and several more working on their own leaks ( of funds under management )

just don't be too quick to assume a speedy recovery ( the regulator is still tweaking )

 

[Dona Ferentes]

Hey guys,?

A lot of rear view mirror stuff going on there.

 

[sptrawler]

a rapidly falling SP and a low PE USUALLY scares buyers away ( except some big predatory fund managers , but some of them might be on holidays )

this situation is tricky it isn't a reputation smash like AMP or IFL , but MAYBE more clients are thinking of departing or reducing investment capital ( for various reasons )

are funds under management going to continue a share decline ( i don't know the answer to that )

will the remaining management take this as a wake-up call , try something better

OR will a bigger player decide to swallow this up ( because let's face it the brand is only tarnished a little , not completely trashed )

i would suggest a 'merger of equals ' but who with there are several worse , and several more working on their own leaks ( of funds under management )

just don't be too quick to assume a speedy recovery ( the regulator is still tweaking )

I think all these fund managers are coming under the pump, ETF's, LIC',s and industry super funds are making it a tough space for boutique funds IMO.
They have to offer something that the aforementioned funds don't, if it isn't better performance, they will soon be given the heave ho, just my opinion.
The general public is getting more and more well informed, it is going to get harder not easier, for investment managers.

 

[divs4ever]

my crystal ball doesn't work , and the ASX forbids us from giving financial advice

so help educate , so the buyer can make a wise decision is the best we can hope for

and this little dust-up does have some historical parallels that might be educational ( Bill Gross leaving Pimco comes to mind as an example )

marriage bust-ups seem to happen all the time , as do big clients changing firms/funds ,

SO FAR nobody has hinted at serious issues , so upwards is possible mid term

 

[divs4ever]

SOME ETFs have a relatively transparent strategy ( the index funds , and those that use a simple filter on an index )

and LICs have their good and bad spells ( you can't expect the fund manager to get it right all the time , nor accept the manager that rarely gets it right .. unless those rare wins are jaw-dropping and easily cover the down results )

but it is simple enough to buy/sell ETFs and LICs OR decide to park the NEXT amount of cash somewhere different ( while keeping current investments where they are )

so yes these funds have to do something a little bit special to justify the fees and charges ( or end up in front of the next Royal Commission )

but yes the investor should be better informed , before selecting a fund manager , LIC or ETF , so they know if and when to pull the plug

an informed public should improve the entire industry ( investing on behalf of a client that can barely read the yearly div. check is always likely to create friction )

 

[finicky]

$10 looks like the most likely target to me.
Two measured moves get me there, the main one being the plunge from 75 to mid 40-45 during Wuhan Feb-Mar 2020 and ignoring the extreme March spike down wick.
Doesn't matter, unless you're a trader - since the fundamentals are in flux, imo best step aside until a weekly or monthly signal - which hasn't happened yet.

Monthly

 

[sptrawler]

From your chart @finicky , it looks as though the share price followed the exuberance of the ASX, now we are on the grind stage where longer term growth is the name of the game, a lot of these managers are going to have to perform IMO.

 

[peter2]

What do you mean, "there are no serious issues"!
Poor performance is a serious issue for a fund manager. Their in-house fund (MGF) has performed poorly over the past 1, 3, 5,10 year periods.

H. Douglass refused to admit that MGF has made investment mistakes (investments in China) until recently. If he'd taken responsibility earlier MFG could have minimised their losses from these mistakes. He continually states that MFG is a good defensive investment. Ha. If you can't admit mistakes and reduce the losses when they appear you're not playing defence but avoidance.

In MFG defense it's difficult to move a few billion dollars around quickly (I assume). One client has decided to move, others may. There's been a massive loss of investor confidence in MFG. Can it be repaired? Yes, only if the boss is focused (divorce, loss of major client can be stressful).

I won't be buying this falling knife but it will be interesting to monitor MFG via the charts.

 

[divs4ever]

What do you mean, "there are no serious issues"!
Poor performance is a serious issue for a fund manager. Their in-house fund (MGF) has performed poorly over the past 1, 3, 5,10 year periods.

H. Douglass refused to admit that MGF has made investment mistakes (investments in China) until recently. If he'd taken responsibility earlier MFG could have minimised their losses from these mistakes. He continually states that MFG is a good defensive investment. Ha. If you can't admit mistakes and reduce the losses when they appear you're not playing defence but avoidance.

In MFG defense it's difficult to move a few billion dollars around quickly (I assume). One client has decided to move, others may. There's been a massive loss of investor confidence in MFG. Can it be repaired? Yes, only if the boss is focused (divorce, loss of major client can be stressful).

I won't be buying this falling knife but it will be interesting to monitor MFG via the charts.

i would argue other fund managers would not consider them serious ( embarrassing , sure ) , especially if the clients stay loyal

next we have a debate of 'conviction' vs 'flexibility ' , now personally i believe in flexibility in my selections but MIGHT invest in a 'high conviction fund ' simply because they are good at a style i am uncomfortable in ( and of course , they have SOME winning runs on the board

i can't condemn a defensive stance i have been expecting a REAL crash since mid-2013 and i still think one will arrive eventually , HOWEVER wouldn't a savvy investor have some cash in a fund with a strong bullish mentality as well , even it was high-turnover small/mid cap player with an aggressive/opportunistic streak , something to reap the 'irrational exuberance ' of the last 5 years sure 2020 was a DIP but also proved to be a buying opportunity if you selected right

so OK why wouldn't Mr/Ms savvy big shot have say 10% of the portfolio in GEAR or at least STW

H. Douglass made some mistakes in China but so did i , only my quirky 'rescue the cash ' attitude saved me from SOME bad results

China in hindsight has been a trap for the greedy ( and i lost a couple of fingers there as well )

i won't be running the calculator over this until the REGULATORY landscape becomes clearer , the regulator might see MFG as a perfect victim to use as an example ( instead of AMP and some others that deserve the complete electron microscope examination )

yes MFG has some issues , but can they find the talent to turn the ship around ,
and a mass exodus near the top of the market , might be their long term savior , imagine the rush market wide if it dropped 60% or more ( in less than a year ) ( i panicked in MFG but ended up awash with cash when the market imploded shortly after , so be one of the few cashed up buyers left )

( i have had several 'lucky escapes ' in the last 10 years , so i know what it is like to make the best choice for all the wrong reasons )

 

[Dona Ferentes]

Magellan co-founder and chief investment officer Hamish Douglass told anxious staff on Monday that the company could recover, partly thanks to its “relationships with thousands of financial advisers”.

Although not a financial adviser, I worked in Financial Services and let me tell you years ago the Magellan roadshow was spinning out of control. Early 2010 and 2011, Hamish would do the legwork and tell the story. But I remember one presentation , about 2016 or maybe 2017, when there was fawning praise from his minions for one advisory group in the room as their longstanding boss was retiring. But listen, small pond, he was a bit of a 'character'. No real enjoyment sitting there squirming as this average Joe was lauded. Sure he brought money in the Magellan door, but so had we. It was uncomfortable, and unnecessary. An insight that they had turned from selling on merits to a marketing outfit.

First hubris, then nemesis.

 

[Garpal Gumnut]

Although not a financial adviser, I worked in Financial Services and let me tell you years ago the Magellan roadshow was spinning out of control. Early 2010 and 2011, Hamish would do the legwork and tell the story. But I remember one presentation , about 2016 or maybe 2017, when there was fawning praise from his minions for one advisory group in the room as their longstanding boss was retiring. But listen, small pond, he was a bit of a 'character'. No real enjoyment sitting there squirming as this average Joe was lauded. Sure he brought money in the Magellan door, but so had we. It was uncomfortable, and unnecessary. An insight that they had turned from selling on merits to a marketing outfit.

First hubris, then nemesis.

A quite believable commentary.

Hubris : Atis : Nemesis : Tisis

Hubris, overconfidence threatens the gods, annoying Zeus. Atis is sent to dim and blur the mind and vision. This leads to further insults to the gods and nemesis, the reckoning. The end result is tisis which I believe is the final punishment.

One wonders where young Douglass and MFG sit on this continuum.

gg