Magellan is down but not out after a gruelling two-year bout of fund outflows and staff volatility, according to executive chair, Andrew Formica.
Formica told investors in the group’s half-year results announcement last week that the fallen star Australian fund manager is poised for growth after resolving “legacy” issues, staunching outflows and lining up a new chief executive.
Since the end of 2021, Magellan has seen funds under management (FUM) evaporate from a high of about A$116 billion to its January 31 reading of A$36.3 billion.
The group’s adjusted net profit after tax dwindled to A$93.5 million for the six months to December last year – about par with the June half-year – compared to more than A$248 million for the same period in 2021 spanning peak Magellan FUM.
However, statutory net profits (which include one-off items) rose from A$83.8 million for the six months to June last year to A$104 million in the December half.
After joining Magellan as chair last August (upgraded to an executive role last October after the shock exit of chief, David George), Formica has slashed costs while quelling staff concerns with a loan write-off and ending an investor dispute over a closed-end listed fund.
“The last six months have been crucial in restoring stability to the business and strengthening relationships with our clients after a turbulent period following leadership changes in 2022,” he told investors.
George spent less than 18 months atop Magellan after the former Future Fund deputy chief was hired in 2022 to replace Brett Cairns, who left in December 2021. He also took over chief investment duties from, Chris Mackay, who served in an interim role after the abrupt departure of incumbent Hamish Douglass, earlier in 2022. Mackay co-founded Magellan with Douglass in 2006 but had left the manager in 2012.
Under an arrangement confirmed in the half-year results, Magellan named Sophia Rahmani as incoming managing director and CEO in-waiting. Rahmani, who quit fellow Australian boutique manager Maple-Brown Abbott to take the job, is slated to start at Magellan in May – or August at the latest. She previously worked at Janus Henderson, the fund manager once headed by Formica, as chief operating officer pan-Asia.
Arvid Streimann has also been promoted to head of global equities from deputy portfolio manager on the flagship Magellan Global Fund.
“I will remain Executive Chair for a transitory period to ensure continuity and stability, focusing my attention on Magellan’s strategic development, while Sophia focuses on the existing funds management businesses,” Formica said.
Among other business development ideas, Magellan plans to grow its US footprint via a multi-affiliate model while launching a retail version of the Unconstrained Fund – managed by Alan Pullen – in the first half of this year.
The group, which reported A$326 million of cash on hand as at the end of last year, is also on the look-out for potential takeover targets.
Despite stemming the tide of outflows in recent months, Magellan bled a little further this January as a net A$400 million, split equally between retail and institutional clients, exited.
Month-on-month total Magellan FUM rose to A$36.3 billion (comprising A$17 billion in retail and A$19.3 billion of institutional money) from A$35.8 billion on the back of solid investment performance.
Global equities – once the by-far largest component of the Magellan business – stood at A$15.5 billion at the end of January with listed infrastructure (A$15.6 billion) and the Australian shares sub-brand, Airlie (A$5.2 billion) completing the set.
The Magellan share price jumped almost 7 per cent on the news to more than A$9..5