In a hint of good news, brokerage Jarden said retail outflows appeared to have stabilized at $400 million, a slight improvement from the annual average of $550 million per month.
However, analysts expect capital outflows to persist given the relative underperformance of Magellan’s flagship global equity and infrastructure strategies.
“We estimate retail outflows will remain elevated at $5.1 billion in fiscal 2023, compared to $5.3 billion in fiscal 2022,” said analysts Elizabeth Miliatis and Kieren Chidgey, who have a $7.55 price target.
“While we suspect the majority of large institutional outflows are now behind Magellan Financial Group, further pressure is likely, with $12.1 billion in institutional outflows expected in fiscal 2023.”
Magellan is not alone
Sean Sequeira of Australian Eagle Asset Management said he was surprised by the scale of outflows given the slowdown in the previous quarter. However, he noted that Magellan’s large-cap equity portfolio would be the first port of call for pension funds looking for cash.
“I would say most of this trade is done unless you see another rout in the gilts,” he said.
Magellan has been rocked by cash outflows over the past year. Its funds under management (FUM) have more than halved, from a high of $116 billion in November last year to $50.9 billion today.
Although the company has been hit hard, it is by no means alone as global outflows linked to passive fee pressure and performance issues weigh on the industry.
Morgan Stanley’s analysis places five ASX-listed managers in the bottom 20 global funds for net new funds in the first half of this year, including Platinum, Perpetual and Pendal.
UBS chief Shreyas Patel retained his ‘sell’ rating after the September update, but cut his 12-month price target to $9.80 from $10.30, reflecting institutional outflows higher expected this year.
Credit Suisse equity research analyst James Cordukes is rated “neutral” with a price target of $10.90 but sees no reason to be positive, predicting institutional FUM in the global strategy will fall to $4 billion by the end of the fiscal year. year 2024.
“No reason to buy”
Mr Cordukes thought Airlie’s Australian equity funds were somewhat isolated under a separate brand, and he did not foresee any major exits. However, infrastructure has encountered difficulties, more related to the decline in attractiveness of the asset class in a rising interest rate environment.
“I don’t see any positives, I just don’t think there’s enough to underweight the stock, but there’s no reason to buy either,” he said. .
“I think Magellan’s ultimate retail playbook will be like what we’ve seen with Platinum, which has had years of underperformance…its portfolio has gradually crumbled but hasn’t fallen to zero.”
Mr Cordukes was looking for “more color” on strategy but said it would all come down to performance.
“Performance is below benchmark and that’s hard for advisers and institutions to digest,” he said.
“Hamish’s exit was also a huge shock to credibility. How do you reverse the outflows? You need performance to be better.
New chief executive David George is due to give shareholders a strategic update this month as the company plots a turnaround.