Shares in embattled fund manager Magellan cratered to a near-eight-year low as accelerated outflows across all its funds and further highlighted the strains facing the local asset management industry.
allocations of superannuation funds from 7 per cent to 31 per cent over the past 26-years, and Australia’s relatively large weighting to equities of 53 per cent.
According to Bank of America, Magellan and Platinum’s shares trade at just over 10.5 times next year’s earnings. That is well down from the five-year average of about 18 times, as expectations of fund flows are re-assessed.A Bank of America report into the sector said ASX-listed asset managers faced mounting competition and free pressure from lower-cost passive funds, a trend among industry super funds towards “in-housing” the management of key asset classes.
“Active management fees have been resilient historically, however we see mounting pressure from very low, and falling, passive management fees,” the report said. “Magellan’s base management fees on retail are about three times those for institutional, highlighting the greatest risk of price competition,” the Bank of America report said.Ironically, Magellan and Platinum – which have pitched their active management capabilities – had boasted passive funds as shareholders due to their inclusion in major sharemarket indices.
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