A daunting task for Magellan’s new chair Hamish McLennan, as Hamish Douglass takes medical leave

Hamish McLennan understands the importance of optics. But he faces a tremendous task to redeem Magellan in the eyes of the market.

Incoming Magellan chairman Hamish McLennan. Picture: John Feder

When Chris Mackay walked into the Magellan Financial office on Monday – stepping into the shoes of an exhausted Hamish Douglass – he was greeted with hugs from staff.

But the market reaction to Magellan 2.0 was a 10 per cent fall in the share price. The task at hand to stop any further outflow from the $93.5bn giant and regain its former stellar reputation is daunting.

To continue for Douglass had clearly become untenable: unrelenting media pressure on his personal life, short selling pressure from the market, the shock departure of chief executive Brett Cairns, the loss of a $23bn mandate from Britain and a sharemarket that was doing him no short-term favours as it sobers up after stimulus.

Still on stage at a conference defending Magellan’s stock positions last week, he is now on medical leave. It is unclear when he might return.

Hamish McLennan steps up to chair Magellan. As a former chief executive of Network Ten he understands the force of the media. He says Douglass requested a period of medical leave to prioritise his health and he fully endorses the request.

Asked when Douglass would return and in what capacity, McLennan said: “It’s too early to say, but Hamish and I will have a conversation when he is ready.”

Big names like John Sevior and David Cooper have been in the mix to take Magellan’s top job. But given the departure of Douglass, even if temporary, news that his co-founder at Magellan who runs ASX-listed investment company MFF Capital from the same office would take over makes sound sense.

Geoff Wilson, who’s Wilson Asset Management owns shares in both the Magellan Global Fund and MFF, calls Mackay a first class investor with exceptional management skills. “Obviously any change in personnel isn’t ideal. In this instance you couldn’t get a better replacement for Hamish while he is on leave than Chris,” he says.

The change of leadership baton, temporary or not allows McLennan to pitch long-term stability to cornerstone investors in the Magellan Group, several of which Mackay was instrumental in securing.

“Chris is the co-founder of Magellan, has always been committed to the company and will continue to be for the long term,” says McLennan. “We were chatting this morning and we think there is a great opportunity to create Magellan 2.0.”

McLennan declined to comment on what Magellan 2.0 would do to the portfolio. Mackay and Douglass have had their differences in the past but the founders’ strategy will stay.

“The focus on high quality companies, bought at value, with profitable growth and downside protection, was a strategy designed by Chris and Hamish and this will this continue,” McLennan says.

Adding oomph to investment credentials is Nikki Thomas, who returns after a three-year break from Magellan as co-portfolio manager. Thomas is well respected as someone prepared for the tough calls and helped build Magellan for over a decade.

“Nikki has Magellan in her DNA. Nikki is the consummate professional who I like immensely and I’m delighted that she is back in the office today,” says McLennan.

In a recent LinkedIn post, Thomas hit back at the barrage of media surrounding Douglass’ personal life. “I know Magellan and Hamish well and both he and his team always operate with the utmost integrity and take their fiduciary responsibilities very seriously. Gossip journalism ultimately shines a negative light on the writer, not the recipients. We all deserve better,” she posted.

The media is unlikely to let up on the Magellan story.

Douglass enjoyed the hot lights of an adoring press for years. But investment stardom allowed the press to justify an intrusion into his marriage separation.

In December, Douglass stressed that he and his wife had no intention to sell off their 12 per cent holding in Magellan despite separating. Friends and colleagues alike confirm that the Douglass family remains extremely close.

“I can’t comment on what Hamish and Alex will do, but they have always been committed to Magellan for the long term,” says McLennan of the Douglass’ stake.

Mackay’s approach to the media has always been conservative. He too has much skin in this game – having not substantially sold down his roughly 10 per cent holding in Magellan.