Why is the Magellan Financial (MFG) share price sliding? 

Posted: 20 December 2021 12:19 pm
News
MagellanFinancial-shares-20Dec_1800x1000_Finder

Shares in the fund manager have lost 46% of their value over the past 12 months with investors continuing to sell down their position during the morning's trade.

Shares in fund management giant Magellan Financial Group (ASX: MFG) are the worst performers on the ASX charts on Monday, continuing their turbulent run over the last several months.

The stock hit a 52-week low of $20.70 in early trading and at the time of writing, was still down 27.1% at $21.40.

Why has the MFG stock price dived?

Magellan Financial shares tumbled on Monday after the fund manager announced it had lost an investment mandate from British wealth manager St James’s Place (SJP).

The mandate, worth an estimated $18 billion, was MFG’s biggest institutional mandate, representing 25% of its institutional managed funds and about 18% of all funds under management at the company.

SJP has now awarded the mandate to US funds management giant State Street Global Advisors.

The loss of the contract will slash about 12% of the group’s annual revenues, Magellan said, although there will be no impact on the accounts related to the financial year ending 31 December.

While no specific reason was given for the loss of the account, the Magellan Global Fund has lagged the MSCI World index by 14.5% over the last 12 months, undermining previous market leading growth that saw Magellan group’s funds under management rise beyond $100 billion in 2021.

This is largely due to Magellan's more defensive strategy.

Magellan’s shares had been placed in a trading halt on Friday afternoon, pending the announcement, and fell nearly 30% after resuming trading on Monday.

Turbulent period

The loss of the key contract also comes amid a turbulent period for the investment manager, which has been dogged by controversy in the last few weeks.

The group has been under pressure after former chief executive Brett Cairns abruptly quit earlier this month.

Magellan has yet to explain why he up and left the company despite working for the group for 13 years.

Days later, Chairman Hamish Douglass announced that he had separated from his wife and sought to publicly reassure the market that there would not be any sale of the founders’ stake as a result of the split.

The group has seen significant outflows in recent months as a result of the underperformance of its key fund, with reports estimating the global equities fund had seen outflows of $560 million between October and November.

That had already resulted in the value of Magellan Financial shares dropping more than 40% over the last 12 months.

Investors would now be hoping that the worst is behind them.

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