The 2023 Stockspot ETF Report revealed that active ETFs experienced some of the sharpest falls in assets under management (AUM) over the past year, driven by net outflows from investors.
Over the 12 months to 30 September, Stockspot said that the Magellan Global Fund - Open Class Units (Managed Fund) suffered a $2.1 billion decline in AUM, more than any other ETF.
Additionally, another active ETF from Magellan – the Magellan Infrastructure Fund (Currency Hedged) (Managed Fund) – suffered the second largest one-year AUM decline of $145 million.
Speaking with InvestorDaily, Stockspot founder and chief executive officer Chris Brycki said that the reason behind investors’ withdrawal from active ETFs is “pretty simple”.
“Active fund managers live and die by the sword of their performance and unfortunately for Magellan, they’ve had quite an extended period of underperformance,” he said.
“There’s been periods of six months and one year where the performance has been better, but if you zoom out and look at five or seven or 10 years, now this isn’t a fund that’s done very well compared to its benchmarks.”
The Magellan Global Fund - Open Class Units (Managed Fund) has underperformed its benchmark, the MSCI World NTR Index (AUD), by 3.2 per cent per annum (p.a.) over five years, 2.0 per cent p.a. over seven years, and 1.3 per cent p.a. over 10 years, as at 30 September.
While the fund has outperformed the benchmark by 3.0 per cent p.a. since inception, underperformance has also been observed in the past three years (-8.7 per cent p.a.), one year (-4.4 per cent), three months (-3.1 per cent), and one month (-1.5 per cent).
“Unfortunately for them, I think a lot of investors and advisers that recommended their clients to invest into their funds have lost confidence in their edge or their ability to beat the market, and that’s what’s led to pretty persistent outflows over the last few years,” said Mr Brycki.
Magellan recently reported new outflows of $2.0 billion for September, including net retail outflows of $0.3 billion and net institutional outflows of $1.7 billion. Its funds under management (FUM) plunged by 10.3 per cent or $4 billion during September to $35.0 billion.
In a letter to shareholders, Magellan CEO David George asserted that “when investment performance is strong, positive inflows follow”.
“We have made a solid start to implementing our five-year strategy and have laid a foundation that can return us to growth in time,” he said at the time.
“Our primary focus has been on delivering the investment performance we are known for, and we are encouraged that the changes we have made during the year have resulted in improved collaboration, information flow, and efficiency.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.