Magellan Financial Group

Magellan is an Australian-based global equities fund manager. Starting in 2006 it has grown funds under management rapidly to almost $58 billion (as at December 31, 2017) to become one of Australia’s pre-eminent global equities managers. It is relatively unique among Australian peers as it sources more than half its funds from outside Australia. It has been able to do this by building strong distribution capabilities and relationships as well as delivering a strong long-term investment performance track record of funds.

Being able to get fund flows from much larger markets offshore gives it a higher growth potential than Platinum Asset Management, for example, which primarily sources funds locally. Analysts are forecasting earnings per share growth of 12.9%pa over the next three years versus 7.1% for Platinum. Continued strong offshore growth potential comes from being a smaller player in a very large global market.

Locally Magellan is well positioned to benefit from expected growth driven by the increasing mix of global equities in retirement savings over time due to a number of reasons, including: the domestic investable asset pool will not be large enough to meet compulsory superannuation flows; and the diversification benefits in terms of industries and geographies available in overseas markets.

This fund manager is not resting on its laurels and continues to invest in its brand, staff and new products and investment strategies. Like other asset managers Magellan is a capital-light business so generates strong cash flows and has a relatively high dividend payout between 75%-80%. However, it is also highly leveraged to equity markets.