Magellan chief Hamish Douglass denies ‘nasty divorce’ rumours from wife Alexandra

In an impassioned video, Magellan co-founder Hamish Douglass says talk of a ‘nasty divorce’ from his wife Alexandra are not true.

Hamish Douglass, Magellan chairman and co-founder, said in a video interview: ‘People have tried to create an image that my wife and I [are going through] some nasty divorce – nothing could be further from the truth.’ Picture: Britta Campion

Rumours of a “nasty divorce” between rock-star global fund manager Hamish Douglass and wife Alexandra are untrue and fears that their separation will lead them to sell shares are “absurd”.

In an impassioned and ­focused video interview, the Magellan Financial co-founder, chief investment officer and chairman moved to reassure investors and shareholders after Monday’s record-breaking 33 per cent fall in Magellan’s share price following the loss of its biggest investment mandate.

“People have tried to create an image that my wife and I [are going through] some nasty divorce – nothing could be further from the truth,” Mr Douglass told Magellan’s head of institutional sales, Matthew Webb.

“My wife and I remain incredibly close. Actually, we spend a lot of time sharing a house together. We’re spending the whole Christmas holidays together.”

Any suggestion that they would liquidate their shareholdings was “absurd”.

Mr Douglass holds about 22.2 million Magellan shares – almost 12 per cent of the company.

His reassurance came as analysts slashed their price targets after the fund manager confirmed the loss of its investment mandate with UK-based St James’s Place, estimated to be worth about $23bn.

The SJP mandate was about 12 per cent of annual revenues and was expected to have a 6 per cent impact on 2022 fiscal year revenue, according to Magellan.

Bloomberg’s consensus of 12-month target prices for Magellan dived 36 per cent to $23.96 after the SJP mandate loss.

But Magellan was now “mat­erially undervalued”, according to Morningstar equity analyst Shaun Ler.

“These near-term headwinds are bumps in the world, not nails in the coffin,” he said.

“Its investing calibre and upside from growing distribution remain intact. Over the medium term, we see greater prospects for Magellan to outperform, and see fresh stream of net inflows, especially into Core Series, FuturePay or Airlie – as group perform­ance normalises.”

Magellan would not be immune from the structural trend of investors moving to passive ­investments, ongoing competition and major institutions in-housing asset management, but was better placed than most active managers to address these headwinds.

Mr Ler added that most of Magellan’s institutional clients hired the group to deliver returns of about 10 per cent a year and focus on downside protection – a hurdle it had consistently surpassed with institutional returns averaging 18 per cent a year over the last five years.

Morningstar did cut its target price to $38 with “high” uncertainty over Magellan’s fair value.

But Mr Ler said the sell-off below $20 a share “widens the investing margin of safety”.

At these levels, investors could buy Magellan shares at less than nine times Morningstar’s projected average underlying EPS over the five years to the 2026 fiscal year.

“We still expect growth in funds under management and underlying net profit after tax of around 5.5 per cent and 4.5 per cent per year respectively, through to fiscal year 2026, due to Magellan’s large FUM pool,” he said.

The loss of the SJP mandate would enable Magellan to reduce concentration and capacity risks by having the ability to invest beyond the megacaps, giving it greater prospects to outperform.

Magellan was expected to release a letter to shareholders on Thursday.

Mr Douglass said his “ego had been bruised”, but he would not be “chopping and changing the strategy”.

The St James’s Place mandate was “very bespoke” and would not affect Magellan’s other funds.

“Their decision to withdraw doesn’t have an impact on any other clients and importantly, doesn’t have that larger impact on our business,” he said. Magellan still had some of the highest operating margins of any fund management business globally, with “very substantial cashflow.”

Mr Douglass conceded that he “made a few mistakes in relation to China”, with large investments in Alibaba and Tencent shares, which dived this year on the back of tighter regulations in China.

But he said markets were now “so wound up with crowded trades, people are in for a rude shock and people’s experience of this party of 2021 will be the great unwind of 2022.”

In this environment, aggressive US rate rises to fight inflation were a risk, Mr Douglass said.

“If this happens in 2022 … people will say ‘thank God I am with Magellan’,” he said.