Note the gap in performance including management fee differential for Magellan customers is back to 2.19% for the simulated portfolio or 26.28% underperformance over the year by Magellan, back down from a 36% annualised underperformance:
@Moonshine66 I get your personal opinion is that Magellan is undervalued because of the share price drop (MFG has dropped from an annual high of $62 to now $35 or a 43.5% drop), but if you perform basic analysis on the company's main business you will see it continues to underperform Perpetual, Australian Ethical Funds, Pendal Group, Penganga Capital and Pinnacles Group of Boutiques.... oh I forgot to mention GQG. This has to put pressure on the fees Magellan can charge its customers.
Magellan have not decreased fees yet to retail investors (only some Institutions), despite the underperformance of last year and the continued underperformance of this year. Financial Planners have been conducting annual reviews with their clients since July and have been reviewing positions (not allocating more funds, redirecting to Pinnacle boutiques - evidence in PNI AGM presentation). As it becomes clearer that Magellan's performance since the start of this financial year is underperforming again, those on quarterly reviews with their financial planners (the ones with money) will start to consider switching all money and seem have started to Pinnacle.
When Magellan's share price was $62, the PE Ratio was over 25 times earnings. The growth of funds from previous years had grown but then EPS had started to slide into negative territory:
The PE Ratio of Magellan has normalised to peers at 15.67 times earnings due to the EPS decline. 16 to 17 is the norm (except for those that are growing). If Magellan's fees are lowered then Earnings Per Share will decline even further. Assume impacts due to reduced fees to EPS are in the order of 25c per annum or $45.75M reduction (25c x 183M shares on issue). If EPS declines by this much, you are looking at a share price between $32 and $34 for the coming year, if PE Ratio of 16 to 17 is applied. The problem perpetuates when the decline impacts FUM and Fund investors put their money somewhere else. This will further reduce FUM dependent upon the level of outflow (note this has only just started to occur - ask platinum shareholders what it is like, it has been happening there for 3 years now).
Your personal opinion doesn't take into account the highly probable impact of fee reduction against MFG earnings and the further reduced confidence from Fund Investors in Magellan's ability to perform against benchmarks (continued reduction of FUM). Fund Investors would be much better to put their money into a Vanguard ETF. Magellan are not demonstrating an ability to turn around the underperformance and need to if they want to maintain the level of fees they charge.
Best of Luck Lost
MFG Price at posting:
$35.26 Sentiment: None Disclosure: Not Held
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