Fund management and investment business Magellan Financial Group Ltd [ASX:MFG] has continued a solid run of gains today, shooting up 9.23%, to $26.74 per share at time of writing.
MFG, a Sydney based international investment group, yesterday made an announcement regarding the funds under management (FUM) as of December 2018.
The investment fund reported at the end of December 2018 the company’s FUM amounted to $70.7 million, while at the end of November 2018 the company’s total FUM was $72.1 million.
MFG also noted a decline in retail and institutional FUM in the December 2018 month as compared to the month of November 2018.
However, as per the update, Magellan’s Average FUM for the six months ended 31 December 2018 was $72,073 million, up from the $53,550 million for the six months ending 31 December 2017.
What caused Magellan Financial’s share price to jump?
Goldman Sachs have today retained their buy rating for this fund manager and have lifted the price target on the shares to $29.50, following the release of FUM yesterday.
While Magellan reported a decline of 1.8% in FUM, this figure was 2.6% higher than initially forecast by Goldman Sachs analysts. MFG’s stock was also helped by its entitlement to performance fees of $42 million — better than initial expectations.
Magellan Financial’s 2019 chapter
The financial industry suffered through one of its worst years in 2018. There were many fund managers who failed to meet the broad market, let alone secure any return.
According to Bloomberg, fund managers posted a loss of 5.7% globally in October 2018. In a year of high volatility and political turmoil, it seems that most funds just could not keep up.
The main point to take away from this — despite MFG’s contraction of FUM — is that Magellan earns the largest proportion of its revenue by charging base management fees on FUM.
Given that MFG averaged FUM around 36% higher over the six-month period ending 31 December 2018, investors can expect a big leap in base fee revenues when Magellan hands in its interim results this February.
Some analysts have also estimated earnings per share of $1.74 for FY19, up from $1.22 for FY18.
If equities markets continue to their current trends, Magellan’s stock price could see some significant gains by the end of 2019.
For Money Morning
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