The under-pressure Magellan is looking to calm investor nerves amid shock leadership changes and fund outflows of almost A$30 billion since last December.
In a release to the ASX last week, the global equities specialist confirmed net outflows since January 1 of A$5.5 billion including A$5 billion of institutional money.
As at February 9, total Magellan funds under management stood at a still-impressive A$87.1 billion but well off the A$116 billion high recorded early in December before the loss of cornerstone UK institutional client, St James Place (SJP).
SJP, Magellan’s first and largest global institutional client, withdrew A$23 billion from the ASX-listed manager late in December, sparking further uncertainty at the firm already facing underperformance issues.
Last week, Magellan co-founder, chair and chief investment officer (CIO), Hamish Douglass, stepped down for health reasons with two former executives returning to steady the ship.
Chris Mackay, Magellan co-founder – who also doubled as chair and CIO until 2012 – and Nikki Thomas, ex global equities portfolio manager, jumped back into similar roles as Douglass takes a “period of medical leave to prioritise his health”, a company release notes.
But the departure of Douglass for an unspecified time has rattled investors and advisers on both sides of the Tasman where his leadership has been a key component of the Magellan success.
Magellan has been particularly popular among NZ financial advisers – although the total funds sourced from this side of the Tasman remains a mystery – with some understood to be reviewing exposure following the latest revelations.
Several Australian-based fund research houses including Morningtar, Lonsec, Zenith and Research IP have since put Magellan ‘under review’ or downgraded ratings.
Research ratings tend to wield less influence in the NZ advisory market than in Australia, where changes can have immediate effect on fund flows.
Magellan also has some wholesale investors in NZ, including the Auckland-based Generate.
Generate will continue to hold its allocation to Magellan, according to a spokesperson for the $3 billion plus KiwiSaver and investment manager.
“We do our own research on the funds we invest in. We like the underlying assets in the Magellan Global Fund, the quality and depth of their investment team and their investment process,” the spokesperson said.
“We wish Hamish a speedy recovery.”
In a presentation released last Friday, Frank Casarotti, Magellan head of distribution, said the update – featuring Mackay, Thomas and head of macro, Arvid Streimann – acknowledged that “you, and we, have been through some pain recently”
“The reality within Magellan is better than the external perceptions,” Casarotti said. “… Notwithstanding what some parts of the media will have you believe, the investment integrity, the investment philosophy and the process remains absolutely intact.”
In the update, Mackay said the Magellan portfolio was in “excellent shape” with enough liquidity to handle the current rash of redemptions.
He said Magellan typically held large, liquid global stocks and significant cash levels in the portfolio of between 7 to 9 per cent.
Mackay said the Magellan outflows were “expected in context of what’s going on” as many institutional mandates had clauses triggered by leadership changes.
Institutional money represents about two-thirds of total Magellan assets under management.
The Magellan share price closed down almost 5 per cent on Friday at just over A$18 compared to its 12-month high of more than A$56.