The funds impacting Magellan’s 70% drop in performance fees
Magellan Financial Group has passed $100 billion in assets under management while profit after tax was up 3% to $202 million.
Announcing its results to the Australian Securities Exchange (ASX), the firm said the first half of 2021 saw average funds under management grow 9% to $100.9 billion. This was split by 74% into global equities products, 18% in infrastructure and 8% in Australian equities and driven by $1.3 billion in investment performance and $3.7 billion in net inflows.
Net profit after tax was up 3% to $202 million compared to $195 million a year ago.
Performance fees before tax were $12.4 million compared to $41.7 million a year ago but the firm said it acknowledged these “can, and usually do, vary significantly from period to period”.
During the reported period to 31 December, the firm’s flagship $13.2 billion Magellan Global fund lost 1.09% and the $711 million High Conviction fund returned 2.3% compared to returns by the Australian Core Strategies global equity sector of 11.5%, according to FE Analytics. This came despite outperformance earlier in the year and was a result of the fund missing out on the short-term rally on the vaccine success in November.
The $2.4 billion Magellan Infrastructure fund returned 1.4% versus returns by the infrastructure sector of 3.3%.
However, chief investment officer, Hamish Douglass, had previously stated he was “not losing any sleep” over the underperformance as the Global fund, he said, was focused on long-term performance and positioned to provide protection with defensive characteristics.
According to the firm’s website, performance fees on the firm’s Global fund was subject to a “high water mark” and paid out when it returned in excess of 10% over the higher of the MSCI World Net Total Return Index hurdle and Absolute Return hurdle, which was the yield of a 10-year Australian government bond.
A dividend of 97 cents per share was to be paid out to shareholders, a 5% increase which the firm said reflected the “increase in the underlying profitability of the funds management division before performance fees”.
Brett Cairns, chief executive of Magellan, said: “We are pleased with this outcome, particularly given the severe market volatility seen around the world driven by the COVID-19 pandemic and the headwind of the rising Australian dollar”.
During the period, the firm restructured its global equities retail funds and launched a sustainable fund and an MFG Core Series.
AUTHOR
Laura Dew
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