Magellan Financial Group Ltd (ASX: MFG) shares are having a rough session on Tuesday after the fund manager released a fresh update.
At the time of writing, the Magellan share price is down a sizeable 7.54% to $9.56.
That leaves the stock down around 4% in 2026, though it remains up about 24% over the past year.
Here's what landed this morning.
Magellan reshuffles global equities funds
According to the release, Magellan announced changes to the investment management arrangements for its Global Equities strategy.
The Magellan Global Fund Open Class Units and Magellan Global Fund Hedged will move to the Vinva Global Alpha Strategy.
Vinva Investment Management will become the investment manager of the funds.
In total, those funds had about $5.3 billion in assets under management at 30 April 2026.
Magellan Asset Management will remain the responsible entity and will keep responsibility for distribution.
The company also intends to close the Magellan Global Equities Fund (currency hedged), which had about $94 million in assets.
Magellan said the investment strategy and philosophy for its Global Opportunities strategy will remain unchanged.
Alan Pullen will continue as portfolio manager, with Ryan Joyce staying on as deputy portfolio manager.
Fees cut as part of the change
The other big part of today's update is the fee cut.
Magellan will reduce management fees across the affected funds from 1.35% per year to 0.89% per year.
In addition, performance fees will also be removed.
On paper, that should make the funds more competitive for clients.
The issue for shareholders is that lower fees also mean less revenue from a sizeable pool of funds.
Magellan said the funds are expected to see an average fee reduction of about 55 basis points, including sub-advisory fees.
The company expects the changes to be implemented in early June, subject to ASX approvals.
Why investors are selling
Magellan expects to realise direct cost savings of about $7 million a year from the changes.
That includes a smaller global equities team and lower fund administration costs.
At 30 April, it also managed about $3.7 billion in similar mandates.
The company said it is still working through how these changes will affect those clients.
That may explain some of the pressure on the share price today.
The cost savings are useful, but they do not fully offset the bigger concern here. Magellan is cutting fees and making more changes while the business is still trying to rebuild confidence.
What did management say
CEO and managing director Sophia Rahmani said the move was about improving outcomes and positioning the business better.
She said:
Today's announcement reflects our commitment to putting clients first and our insight into client needs today and in the future.
Rahmani also said Vinva has a strong long-term track record.
She added that the lower fees strengthen the competitiveness of Magellan's global equities offering.
Foolish takeaway
I am not in a rush to step in here.
The fee cuts may make the funds easier to sell, but I still want to see evidence this actually improves flows.
Magellan has already been through a long reset, and today's update adds another moving piece.
Until fund flows start moving in the right direction, I'll be holding off any investment in the stock.
The post Why Magellan shares are getting smashed today appeared first on The Motley Fool Australia.
Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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