Magellan Financial Group Ltd · ASX:MFG
Magellan Financial — FY2018 Earnings Presentation
35 slides from Magellan Financial's earnings presentation, Aug 9, 2018
Slide 1: Magellan Financial Group Limited Final Results
Magellan Financial Group Limited Final Results For the year ended 30 June 2018 For personal use only Hamish Douglass | CEO & Chief Investment Officer
Slide 2: Magellan Financial Group Full Year Results
Magellan Financial Group Full Year Results $ million 30 June 2018 30 June 2017 % change For personal use only Management and services fees 385.8 307.2 26% Performance fees 39.8 21.7 83% Other revenue 27.0 9.4 188% Revenue 452.6 338.3 34% 1 Expenses before MGG net offer costs and amortisation (101.0)
Slide 3: Financial Year Highlights
Financial Year Highlights For personal use only • Strong growth in funds under management and management and services fees: – Average funds under management up 29% to $59.0 billion1 – Management and services fee revenue up 26% to $385.8 million1 – Profit before tax and performance fees of the Funds
Slide 4: Ongoing Capital Requirements
Ongoing Capital Requirements For personal use only • Magellan has built up significant capital over the past 12 years (net tangible assets as at 30 June 2018: $515 million) • The Board has undertaken a review of the ongoing capital requirements of the Group and has concluded: – Magellan has a very s
Slide 5: Revised Dividend Policy
Revised Dividend Policy • Increased payout ratio to 90-95% of profit after tax from funds management segment For personal use only – Interim and Final Dividends based on 90-95% of profit after tax of funds management segment (excluding performance fees) – Annual Performance Fee Dividend of 90-95% of
Slide 6: Stakeholder value creation
Stakeholder value creation For personal use only Value creation since 2006 Magellan Financial Group1 – shareholders $4.3 billion Global Equities2 – clients $26.4 billion Infrastructure Equities2 – clients $4.1 billion Total $34.8 billion ~$35 billion of value created for stakeholders since the busin
Slide 7: 2019 Expense Guidance
2019 Expense Guidance For personal use only • Total Group expenses (ex non-cash amortisation) to be approximately $105 million in the 2019 financial year ($101 million for FY2018) • Non-cash amortisation is expected to be approximately $4.2 million in the 2019 financial year1 • Dividend payout exclu
Slide 8: Funds Management
For personal use only Funds Management Magellan| 8
Slide 9: Funds Management Business
Funds Management Business For personal use only $ million 30 June 2018 30 June 2017 % change Revenue Management fees 381.1 300.5 27% Performance fees 39.8 21.7 83% Services fees 4.7 6.7 -29% Interest/other income 3.2 0.3 909% 428.7 329.2 30% Expenses Employee expense 51.9 47.3 10% Marketing expense
Slide 10: Revenue Growth Drivers
Revenue Growth Drivers 7% For personal use only • Magellan reported 29% growth in management, services and performance fees in 2018 21% – 72% was contributed from Existing FUM – 21% was contributed from Net Inflows during the year – 7% was contributed from the acquisition of 72% Airlie • Excluding t
Slide 11: 2018 FUM Flows
2018 FUM Flows For personal use only • By channel, for the 12 months ended 30 June 2018: – Retail net inflows totalled $1.9 billion Total net inflows for – Institutional net inflows totalled $2.5 billion the year ended 30 June 2018: • By strategy, for the 12 months ended 30 June 2018 $4.4 billion –
Slide 12: Global Equities Performance Review
For personal use only Global Equities Performance Review Magellan| 12
Slide 13: Magellan Global Equities – investment objectives
Magellan Global Equities – investment objectives For personal use only Achieve attractive risk adjusted returns over the medium to long-term (9% p.a. net of fees long term target) Minimise the risk of permanent capital loss (Downside protection) IP083 Magellan| 13
Slide 14: Delivering returns to investors
Delivering returns to investors Net Returns as at 30 June 2018 For personal use only Performance objective Magellan Global Fund 9% p.a. 1 year 16.9% ✓ 2 years (% p.a.) 16.1% ✓ 3 years (% p.a.) 10.4% ✓ 4 years (% p.a.) 14.9% ✓ 5 years (% p.a.) 14.3% ✓ 6 years (% p.a.) 18.2% ✓ 7 years (% p.a.) 18.2% ✓
Slide 15: Downside protection
Downside protection Magellan Global Fund performance in rising and falling markets For personal use only 120% ◼ Upside performance ◼ Downside performance 100% Since Inception the 80% strategy has captured approx. 100% of the upside 60% and fallen less than 50% of the 40% market’s decline 20% 0% 3 Ye
Slide 16: Consistent outperformance since inception (Institutional View)
Consistent outperformance since inception (Institutional View) For personal use only Magellan Global Rolling 3 year returns Equities Total number of observations 97 Number outperformed MSCI World 96 Outperformance consistency 99% Average excess return over MSCI World (% p.a.) 6.0% There was one obse
Slide 17: Consistency in outperformance over time (Retail View)
Consistency in outperformance over time (Retail View) For personal use only “Magellan Global has an excellent Magellan Global long-term track record. Measured over Rolling 3 year returns Fund all rolling three-year periods since its Total number of observations 97 inception in June 2007 to 31 Jan 20
Slide 18: Top Quartile in outperformance consistency (Retail View)
Top Quartile in outperformance consistency (Retail View) For personal use only Outperformance Consistency Net Magellan consistency Median consistency Top Quartile of fees Vs MSCI World 1 Year 92% 25% ✓ 3 Years 75% 28% ✓ 5 Years 85% 23% ✓ 7 years 89% 36% ✓ Since Inception 91% 37% ✓ Source: Morningsta
Slide 19: Outperformance consistency versus MSCI
Outperformance consistency versus MSCI Since 1 July 2007 (Retail peer group) For personal use only Rolling 3 Year returns Outperformance Consistency MFS® Global Equity Trust 94% Magellan Global 91% Arrowstreet Global Equity 91% IFP Global Franchise 86% Schroder Global Core 79% iShares International
Slide 20: Average excess returns
Average excess returns Since 1 July 2007 (Retail peer group) For personal use only Rolling 3 Year returns Average Excess return (% p.a.) Magellan Global 4.9% IFP Global Franchise 4.3% Arrowstreet Global Equity 2.2% MFS® Global Equity Trust 2.1% PM Capital Global Companies 1.9% Peters MacGregor Globa
Slide 21: Magellan's excess returns remain top quartile
Magellan’s excess returns remain top quartile (Retail peer group) For personal use only Rolling 3 Year excess returns 14% Top quartile excess Magellan Global Top decile excess 12% 10% Average excess 8% returns have fallen for top performing 6% managers as 4% markets have risen 2% 0% -2% Jun-10 Jun-1
Slide 22: Drivers of shareholder value
For personal use only Drivers of shareholder value Magellan| 22
Slide 23: A model for long term Total Shareholder Return (TSR)
A model for long term Total Shareholder Return (TSR) For personal use only 4-5% pa 11-14% pa FUM Flows/ additional opportunities 7-9% pa Existing business - Dividend yield Existing business Long term TSR investment growth TSR through cycle Double digit TSR from existing business Magellan| 23
Slide 24: New FUM opportunities
New FUM opportunities Self-directed High Conviction For personal use only retail Fund Global Equities US$8 billion A$65 billion in remaining capacity unlisted managed Global Listed funds1 Infrastructure Airlie Products under Sustainable development strategies Seeking to launch new US$15-20 billion p
Slide 25: Self-directed retail channel
Self-directed retail channel For personal use only • Estimated self-directed investable assets of ~$500bn1 Market • Estimated global equities opportunity in self-directed of $50-75bn2 opportunity • Magellan currently at ~$1.3bn • Australian self-directed investors are materially underweight global e
Slide 26: High Conviction Fund
High Conviction Fund For personal use only • Current FUM of $544 million Magellan High Conviction Fund • Concentrated portfolio which represents 1 year 19.0% our best investment ideas • Developed outstanding 5 year 3 years (% p.a.) 12.4% investment track record 5 years (% p.a.)/ • Launched wholesale
Slide 27: Airlie retail opportunity
Airlie retail opportunity For personal use only • Launched the Airlie Australian Share Fund in June 2018 • Providing retail investors with access to one of the pre-eminent investment teams in Australian equities • Adviser fund launch roadshow across Australia and New Zealand 17-27 July 2018 – ~600 a
Slide 28: Global Listed Infrastructure
Global Listed Infrastructure For personal use only • Listed infrastructure is gaining acceptance globally as an asset class • Magellan is well positioned to grow in this area given: – Our unique approach to defining “infrastructure” – Consistency of investment returns and long term outperformance •
Slide 29: Delivering returns to investors
Delivering returns to investors AUD Returns as at 30 June 2018 For personal use only Performance objective Magellan Infrastructure Fund (At least CPI + 5% through the cycle) 1 year 6.9% 2 years (% p.a.) 7.8% ✓ 3 years (% p.a.) 11.0% ✓ 4 years (% p.a.) 11.3% ✓ 5 years (% p.a.) 13.4% ✓ 6 years (% p.
Slide 30: Infrastructure excess returns & consistency
Infrastructure excess returns & consistency For personal use only Rolling 3 Year returns Outperformance consistency Outperformance Consistency Lazard Global Listed Infrastructure 100% CFS FC W Inv-CFS W Glbl Listed Infra Sec 100% Magellan Infrastructure 98% Macquarie International Infra Ses 67% Cohe
Slide 31: Sustainable/Low Carbon Strategies
Sustainable/Low Carbon Strategies For personal use only • Leverages Magellan’s existing intellectual capital and investment processes and Low Carbon/Sustainable overlay is targeting a real client need • Requires meaningful track record – typically minimum 3 years – Global and US strategies have been
Slide 32: Driving shareholder value
Driving shareholder value For personal use only Outstanding existing client business (FUM $70.0 billion)1 Increased cash dividends to shareholders (payout 90-95% of funds management profit after tax2) Numerous additional FUM opportunities 1. As at 31 July 2018; 2. Excluding amortisation, subject to
Slide 33: A model for long term Total Shareholder Return (TSR)
A model for long term Total Shareholder Return (TSR) For personal use only 4-5% pa 11-14% pa FUM Flows/ additional opportunities 7-9% pa Existing business - Dividend yield Existing business Long term TSR investment growth TSR through cycle Double digit TSR from existing business Magellan| 33
Slide 34: Important Information
Important Information This presentation has been prepared by Magellan Financial Group Limited (‘MFG’). For personal use only While the information in this presentation has been prepared in good faith and with reasonable care, no representation or warranty, express or implied, is made as to the accur
Slide 35: For personal use only
For personal use only www.magellangroup.com.au Phone: +61 2 9235 4888
Magellan Financial Group — FY2018 Earnings Presentation on 6ix