Magellan and Premier to join ASX 200

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Star fund manager ‘Magellan Financial Group’ is one of the four new companies that will be added to the S&P/ASX 200 Index when the index is rebalanced after the close of business this Friday. Each quarter, S&P Dow Jones reviews the constituents of the index based on changes in the free float market capitalisation of the underlying stocks, and adjusts as appropriate.

The inclusion or deletion of stocks will lead over time to passive fund managers, such as managers of index based funds and Exchange Traded Funds (ETFs), buying and selling in line with the changes in order to maintain accurate tracking with the underlying index. For a company joining this key benchmark index, this “new demand” can be quite material.

Four in, four out

Four new companies join the S&P/ASX 200 Index, with four resources companies being removed. The changes are:

Additions

HZN Horizon Oil Limited
MFG Magellan Financial Group Limited
PMV Premier Investments Limited
TME Trade Me Group Limited

Removals

BTU Bathurst Resources Limited
GBG Gindalbie Metals Limited
GRY Gryphon Minerals Limited
SAR Saracecen Mineral Holdings

Magellan has trebled in price

Leading up to this index change, Magellan has risen in price from $2.15 at the end of June to $6.75 on Friday. Over this period, funds under management have increased from $4 billion at the end of June, to $6.4 billion at the end of December, to over $10.4 billion at the end of February. While the win of a $3 billion institutional mandate is responsible for most of the jump in February, retail inflows to their flagship ‘Magellan Global Fund’ and ‘Colonial First State Magellan Global Option’ still amounted to a net $142 million in the month of February.

Solomon Lew’s Premier Investments joins the index

Solomon Lew chairs Premier Investments and is the major shareholder. The Premier group owns a suite of specialty retail fashion chains under the ‘Just Group’, led by the former CEO of David Jones, Mark McInnes. Premier also owns a key strategic stake in Breville.

Also joining the index are Trade Me and Horizon Oil. The Trade Me Group is the leading online marketplace and classified advertising platform in New Zealand. Acquired by Fairfax and then spun out in an IPO in December 2011, its share price has almost doubled to just under $4.00. Horizon Oil is an oil and gas exploration, development and production company with projects located in PNG, New Zealand and China. The smallest of the four new entrants by market cap, its shares are trading near its 5-year high of $0.48 and closed on Friday at $0.45.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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