Magellan defies hedge fund struggles with bumper profit

The hedge fund run by richlister Hamish Douglass has shrugged off market volatility to post a bumper profit.

Magellan CEO Hamish Douglass

The $40 billion funds-under-management Magellan Financial Group, run by richlister Hamish Douglass, has revealed a bumper profit in its tenth year spent scouring the world for high-performing investments.

At a time when many hedge funds are struggling amid market volatility and investors are wary of market investments, Magellan (MFG) booked a 14 per cent lift in annual profit, reaching $198.4 million for the year through June.

Revenue soared 17 per cent to $333.8m, while funds under management ballooned 11 per cent over the year to $40.5bn during a time when many wary investors were pulling billions in cash from hedge funds.

Magellan notched up $195m of average monthly net retail inflows over the year, compared to an average of $120m a year earlier. However, institutional inflows were less rosy, with net inflows of $1.8bn for the year, down on last year’s $3.8bn.

Mr Douglass, a BRW richlister with a wealth of more than $500 million, said the group was now taking care of more than $12bn worth of Australian and New Zealand retail investors.

The strong inflows came despite the Magellan Global Fund portfolio returning a negative 0.1 per cent during the year. Over the last five years the fund has returned an average 19 per cent, and an average of 10.6 per cent over the last decade. The Magellan Infrastructure Fund, on the other hand, returned 17.8 per cent last year.

“This is a testament to the outstanding investment performance delivered by our infrastructure team and the excellent work of our distribution team,” Mr Douglass said.

Magellan, which now employs more than 100 people, will pay a final 38c dividend, bringing the year’s total shareholder payout to 89.3c a share — a 19 per cent increase on the prior year.

The solid results for Magellan come at a time when savage market swings are making the outlook for fund managers grow dimmer as global central banks up-end value signals with ultra-low interest rates.

Funds across the globe have been privy to an investor exodus this year as customers pull funds amid poor performance numbers and high fees. Last financial year’s investor run was the longest streak since the global financial crisis.