Magellan shed a further A$6.7 billion in funds under management (FUM) in September in an almost equal mix of net outflows and portfolio losses.
The under-fire manager has now seen FUM slump by more than half since the December 2021 high of A$116 billion to just under A$51 billion as at the latest count.
During September Magellan reported net outflows of A$3.6 billion including A$400 million from retail clients and the remaining A$3.2 billion pulled by institutional investors.
“Approximately half of the institutional outflows relate to the liquidity requirements of a client impacted by global market volatility in late September,” according to a Magellan ASX note issued last week.
The September outflows come after a steady exit of investors from Magellan this year as the loss of institutional mandates (including the A$23 billion redemption by cornerstone UK client, St James Place) compounded performance woes for the global equities specialist.
Magellan investors have also been spooked by a series of top-level changes at the firm dating back to last December with the abrupt resignation of chief executive, Brett Cairns.
Founder and chief investment officer, Hamish Douglass, ultimately dropped both his board and executive roles earlier this year for health reasons but will return in an advisory capacity later this month.
Research house Morningstar Australia downgraded Magellan in September, noting the once-star manager had “outlived its grace period with investors”.
The Morningstar note, penned by analyst Shaun Ler, says the investment firm – now led by former Future Fund deputy CIO, David George – was losing its “moat”.
“We expected Magellan to perform and clients to stay through occasional bouts of underperformance,” Ler says in the note. “But we underestimated the market disruption to Magellan’s investment style, and performance has not materially improved since it began in late 2020. We also understated the downside from the dilution of Magellan’s brand, evidenced by mandate losses and outflows.”
Morningstar cut its ‘fair value’ for Magellan by 13 per cent to A$20, still well above the A$10.75 share price the company changed hands at last Friday.
“Even if Magellan were to improve its track record, its competitive position is unlikely to be regained. Some funds, such as its global fund, were almost a default for advisers and money managers,” Ler says. “Combined with an abundance of alternatives, Magellan has matured in the global investing space, in the Australian context. Its above-average retail fees are becoming difficult to justify.”
Nonetheless, Magellan still holds on to many NZ retail and wholesale clients including as an underlying manager in the Generate KiwiSaver scheme.
According to the latest Aon NZ investment survey, the flagship Magellan global equities fund returned 1.2 per cent for the three months to the end of August – ranking seventh out of 25 managers in the category – despite falling 2.7 per cent in August.
For the five years to August 31 this year, the Magellan global shares fund returned an annualised 10.7 per cent on an unhedged basis (before fees and taxes) in a mid-table performance.