Magellan Financial Group Limited (MFG)
Magellan Financial Group (MFG) is an Australian based specialist fund management group. The group is involved in the development of globally focused investment funds for both retail and institutional investors.
The company has three main investment funds:
|>||Magellan Global Fund – a long-only unit trust that invests in a concentrated portfolio of global equities.|
|>||Magellan Infrastructure Fund – a unit trust specialising in investing in global infrastructure securities with the aim of providing consistent long-term absolute returns which exceed the risk adjusted returns expected from the asset class.|
|>||Magellan Flagship Fund Limited – an ASX listed company (MFF) which invests in a concentrated portfolio of high-quality global equities.|
MFG’s 1H13 results were amazing. Revenue came in at $32.9 million, a 112% jump on the same period in FY12. Net profit was $20.9 million, a staggering 195% increase on the prior corresponding period.
The group’s operations over the period were characterised by further growth in funds under management, the strong investment performance of its managed investment funds, and further improvement in the group’s net assets per share.
Performance fees and funds under management
The group has two main sources of income, one via management fees, which are set between 1.25% and 1.35% of funds under management.
The other is via performance fees, which are calculated on a six monthly basis at 30 June and 31 December with MFG earnings fees on the excess return (the total return of the fund above the respective benchmark).
|>||Magellan Global Fund – 10% of the excess return above the higher of either the MSCI World Index Total Return in AUD and the 10 year Australian Government bond rate.|
|>||Magellan Infrastructure Fund – 10.1% of the excess return above the higher of either the UBS Developed Infrastructure and Utilities Net Total Return Index (AUD hedged) and the 10 year Australian Government bond rate.|
The performance fees has been the main driver of MFG’s earnings given the fund’s ability to outperform the benchmark – the Magellan Global fund has outperformed on average by 10.2% a year since its inception.
The group has also enjoyed strong inflow of funds, with $1.55 billion added in May alone.
MFG’s funds under management now stands at an impressive $12.9 billion, a massive increase from a year earlier where it held $3.7 billion.
MFG has steadily been growing funds under management over the last few years and we see this continuing.
The group has already a received a $396 million mandate from an institutional global equities firm, which commenced the first of this month. We expect continued inflows and performance fees to drive MFG ‘s share price to new heights.