Magellan continues to bleed funds

Magellan Financial is suffering a rapid outflow of funds under management as the under fire fund manager struggles after its spectacular fall from grace.

Executive chair of Magellan Andrew Formica, photographed at their offices in Sydney. Britta Campion / The Australian

Magellan Financial Group continues to suffer a rapid outflow of funds under management as it struggles to right the ship after a spectacular fall from grace in the past two years.

Total funds under management for October fell to $34.3bn from $35bn, with a net outflow of $800m including $300m of net retail outflows and $500m of next institutional outflows.

Of the $700m fall in the value of its funds under management, $300m came from Australian Equities, $300m came from Infrastructure Equities and $100m came from Global Equities.

The embattled global fund manager has struggled to restore confidence among retail and institutional clients in the wake of its sub-par investment performance since the Covid-19 pandemic.

After losing a $23bn investment mandate with St. James’s place in late 2021, Magellan has suffered damaging management upheavals, including the resignation of its former CEO Brett Cairns and its former chairman, chief investment officer, co-founder and biggest shareholder, Hamish Douglass.

Magellan has now lost 71 per cent of its funds under management since November 2021.

The latest figures marked the 22nd straight month of outflows since its funds peaked at $116.41bn.

Last month Magellan axed its chief executive officer, David George, after just 17 months in the job.

Mr George, a former top Future Fund executive, had worked to stabilise and improve Magellan’s core funds management business.

He also set a strategy to diversify the business, establish new products and enhance client solutions.

But Magellan decided to “refocus leadership” to “accelerate the progress made to date.”

The immediate focus is on ensuring it can retain, attract, and appropriately incentivise its staff to improve its investment performance with additional retention payments set to be made to close out existing employee share purchase plan loans for most of its staff by September 2025.

Magellan also plans to have a new employee accountability and alignment model by June 2024.

Executive chairman Andrew Formica aims to continue the journey to restore Magellan to its place as one of Australia’s leading fund managers, but a short-lived target to restore its funds under management target has been quietly shelved to focus instead on performance.

Until recently, the company planned to restore its funds under management to its mid-2021 level of $115bn by 2027. Magellan’s share price hit a 10-year low of $6.06 after axing its CEO last month.

However, its share price has enjoyed seven consecutive daily gains since then.

Magellan shares were down 0.72 per cent at $6.90 at 1.20pm AEDT on Monday.

Originally published as Magellan continues to bleed funds