Magellan Financial Group: Result 2016

Retail investors have given Magellan a boost with fund inflows of $2.3 billion in 2016.

Magellan's total funds under management (FUM) increased 11% to $40.5 billion in the 2016 financial year boosting fee revenue by 24% to $314 million and improving net profit by 14% to $198.4 million.

Year to June 2016 2016 2015 /(–)
Total funds ($m)  40,495  36,381 11%
Revenue ($m)  334  285 17%
Expenses ($m)  74  55 35%
Net profit ($m)  198  174 14%
EPS (c)  124  109 13%
DPS (c)  89  75 19%

Pleasingly for Magellan, the fastest growth came from retail investors, from whom it earns the highest margins – about 1.3% compared to around 0.4% for institutional money. Retail funds benefited from a net inflow of $2.3bn; together with asset growth, retail FUM increased by almost 23% to $12 billion

There was a net inflow into institutional funds of $1.8bn, and institutional FUM ended the year 7% higher at $28.5 billion. $12bn of this is located in the UK, while a futher $9bn is located in North America. Management said it had plans to launch three new global equities funds over the next 12–18 months.

Along with the growth in FUM, management continues to build its business, hiring an additional ten people during the year – including four in the investment team – taking total staff to 101. Total expense rose 36% to $72m, including a 35% rise in wages to $42m. The average employee was paid a healthy $438,000 in the year, up from $390,000, which puts it ahead of Platinum Asset Management on this measure, but behind Henderson Group and Perpetual Investments (by our estimates).

Since we last reviewed Magellan in Fund managers at 20 paces (Hold — $22.76) its share price has increased more than 11% and we continue to recommend members HOLD.

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