Lessons in Magellan’s rockstar weirdness

Magellan Financial Group chairman Hamish Douglass. Picture: Britta Campion / The Australian

You have to agree that the two statements this week from listed funds manager and former sparkling but now somewhat faded star of the bourse, Magellan Financial Group, were more than a little weird.

On Monday evening, out of the blue, came the announcement that the company’s CEO of two years – but long-term, indeed from launch, insider - Brett Cairns had resigned that day.

The statement said he “will be leaving the company” – although it seemed that actually meant he “would” leave immediately. Like, that very day. For the Magellan statement went on to announce that the CFO Kirsten Morton had been appointed interim CEO; and that the board and the company’s executive chairman, founder and driving force Hamish Douglass “are very pleased to be working (present tense) with Kirsten”.

The statement also threw in that Douglass “will remain as Magellan’s executive chairman”. Why on earth tell us that; surely it went without saying? Surely, it would only have been necessary to tell us if he wasn’t remaining executive chairman?

The stated, but unexplained – especially, in terms of its suddenness - reason for the CEO’s resignation was “personal reasons”. But the statement just got weirder and clunkier.

It said Cairns had been a “long-standing and key member” of the Magellan team, but that the board was “pleased” to appoint Morton as the interim CEO.

Hmm, presumably until Cairns’s resignation plumped on Douglass’s desk sometime on Monday, the board would have been very pleased to keep Morton going as CFO.

Then Douglass – who to be frank, is the decision-maker at that board table – closed off with: “Kirsten is ideally positioned to take on the responsibilities and drive Magellan forward”. Plus the reference to being pleased to be working with her.

Megellan Financial Group chairman Hamish Douglass. Picture. Britta Campion / The Australian

All that doesn’t sound very ‘interim’ to me. In short, the rather brief statement managed to project an image of rabbits caught frozen in the spotlight. That’s not something that really promotes confidence. And then came Wednesday’s statement, the like of which I can’t recall ever seeing before from an Australian listed company.

It certainly added to the weirdness of the Magellan week – as a statement from Magellan to the ASX, but not by Magellan.

The only Magellan input was a single sentence: “The company has received the following statement from Alexandra and Hamish Douglass”.

The Douglass statement disclosed the two – husband and wife – had “separated some months ago”, along with the substantive message that they had “no intention to sell any of their shares in Magellan”. Unlike the resignation statement, this one was not out of the blue. It followed a report in a Nine Group newspaper of their separation and which precisely posed the question of what would happen to their joint 12 per cent stake in Magellan.

Now again, so what? Why should the potential for, say, 6 per cent of Magellan – half the 12 per cent – coming on to the market in a marriage breakup be either meaningful or disclosable?

But that leads on to a broader question: are entities like Magellan suitable for public listing on the ASX?

This has got nothing to do with the matter of the Douglass marriage, but all about the reality that Douglass is Magellan and he’s a rockstar. He created it, he built it, he led it to spectacular outperformance, and more recently, and only more recently, to rather China-based significant underperformance.

The point about a funds manager underperforming in the immediate past; is that it drags down the performance not just in the latest year, but the latest three years and five years.

The continued outperformance in all the earlier years gets ‘disappeared’.

This over-whacks the share price because it had previously been over-leveraged precisely on the ‘rockstar’ over-performance.

And then you get a messy week like this one.