The X factor and unconventional wisdom.
Conventional wisdom within the Australian financial services sector says that local fund managers are at a significant disadvantage when it comes to raising significant amounts of FUM, whether from local or overseas investors. By conventional, we would include David Murray and his FSI panel, most local fund managers, and the majority of offshore institutional investors.
The main benefit Australian managers have comes from managing local Australian assets on behalf of local Australian investors. When it comes to managing offshore assets, and equities in particular, for offshore investors that is considered more than an uphill battle for an Australian born, bred and domiciled fund manager.
What then is the difference or the X factor with Magellan Financial Group, who released their interim results this week? Ignoring their financial results, and focusing on the extent and source of their Funds under Management would indicate that either conventional wisdom is simply wrong, or there's more to it than that.
In the six months to December 2014 Magellan increased their FUM from $23.5 to $31.6 billion, with the offshore component increasing from $13.9 to $19.6 billion. No doubt the fall in the A$ has assisted in raising the overall FUM figure, but it doesn't factor in the fact that in spite of being a relatively young manager (having started out from a standing start in July 2007) 62% of that FUM comes from overseas institutional investors.
I'm sure there's not one single reason, with strategy, structure, market capacity, management, marketing and distribution all playing their part. However performance since inception has been good without being stellar. In fact between launching in July 2007 and July 2011 the Magellan Global Fund had gained a cumulative 1.01% inclusive of distributions net of fees. To be sure the fund's performance then accelerated though to December 2013 to be up a cumulative 96% courtesy of a 48% return that year, before going sideways for the following eight months and then lifting in the final quarter of 2014.
Whatever the X factor is, full marks to the Magellan team. They've proven that local Australian fund managers can compete on the global as well as the local stage in spite of being geographically challenged.
Specific results received this week include the following PERFORMANCE UPDATES:
Bennelong Alpha 200 Fund returned 2.18% during January 2015, bringing the fund's annual return to 4.13% since inception.
Cor Capital Fund returned 4.0% during January and 8.57% over the previous 12 months with a volatility of 4.94%. The return since inception in August 2012 was 6.34% per annum with a volatility of 5.62%.
The Aurora Fortitude Absolute Return Fund returned -0.04% in January, bringing the fund's annual return per annum to 7.31% with a volatility of 2.70%..
FUND IN FOCUS VIDEO released this week: Jack Lowenstein, the Joint CIO of the Morphic Global Opportunities Fund discusses January performance and condition of the market.
25-27 March 2015 - Digital Marketing for Banking and Financial Services Summit
For those of you travelling on buses this weekend, after watching this you might think twice about offering up your seat.
On that note enjoy your week-end, and if you're affected by either cyclone Marcia or Lam, stay safe.
Kind regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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