Magellan’s Chris Mackay seeks to steady ship after $5.5b in outflows

Magellan Financial Group portfolio manager Chris Mackay has launched a strong defence of its investment strategy as the fund manager revealed it had suffered another $5.5 billion in outflows since the start of the year.

Magellan was thrown into further turmoil this week, with founder Hamish Douglass taking medical leave from the roles of chairman and chief investment officer, and Mr Mackay was brought in to run its investments and help stabilise the ship.

Magellan portfolio Chris Mackay addresses a webinar on Friday.Credit: AFR

Mr Mackay, who co-founded Magellan alongside Mr Douglass, on Friday admitted there had been mistakes in how the company was run, but sought to reassure clients investing in its managed funds that there would be no major changes in its approach to stock-picking.

Addressing a webinar for financial advisers and investors, Mr Mackay said he had received extensive support for Mr Douglass from investors.

“He clearly had a lot of pressure, and he’s working through, he was bloody brave. Without breaching confidences, we believe, even since Sunday, it’s been very encouraging,” Mr Mackay said of Mr Douglass.

“But it’s very early, let’s not overstate it. What we want is for Hamish to be happy, healthy, and back investing for us.”

Magellan told the market on Friday its funds under management had fallen to $87.1 billion as of February 9 after $5.5 billion of outflows since the start of the year, but Mr Mackay said this was not a surprise.

“There’s been an outflow. That of course is expected in the context of what’s going on. A number of mandates have firm clauses to that effect,” he said.

A key source of pressure on Magellan has been the underperformance of its global fund - which holds positions in stocks that have fallen sharply recently, including Netflix and Facebook’s owner Meta.

Mr Mackay said Magellan the corporate group had made mistakes by adding “complexity”, but strongly defended its flagship global fund, which he described as “superb”.

“I have no issues with the portfolio at all,” he said. “There are no orange or red flags within the portfolio at all.”

In an ASX announcement, Magellan said the drop in its funds under management was caused by market movements, cash distributions paid in January and outflows - as big investors take their money elsewhere.

There had been $5 billion in institutional outflows since January 1 and $500 million in retail outflows in that period, the company said.

Mr Douglass this week said he would take medical leave from the role of chairman and chief investment officer after a period of “intense pressure and focus” on both his personal and professional life.

Magellan has seen its share price collapse in recent months due to underperformance, the abrupt departure of a former CEO, and its biggest client pulling its funds.

Mr Douglass also confirmed last year that he had separated from his wife after concerns were raised that a divorce could affect the share price if the couple’s jointly-owned stake in the business was sold.

Magellan shares dropped 3.8 per cent to $18.34 on Friday, and have dropped about 60 per cent in the last six months.

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