Magellan Financial Group co-founder Hamish Douglass resigns from board but door still open

Co-founder and former Magellan Financial chairman, Hamish Douglass, has resigned from the board after taking medical leave but still has an invitation to return.

Co-founder and former Magellan Financial chairman Hamish Douglass has resigned from board after taking medical leave last month. Picture: Britta Campion/The Australian

The resignation of Hamish Douglass from the board of embattled fund manager Magellan Financial Group was couched as a procedural move due to his medical leave of absence.

However he’s unlikely to return to the roles of chairman, chief investment officer and lead portfolio manager of the global fund manager he co-founded.

In an ASX statement on Monday, Mr Douglass said his resignation as a director from the board, effective from Saturday, March 19, was “solely due to his medical leave of absence”.

It’s understood that Magellan’s board would still welcome Mr Douglass back if he were to consider rejoining the board when he has fully recovered from his current medical condition.

However he is unlikely to resume multiple roles at the fund manager given that stress was a contributing factor in his medical leave of absence.

After a two-year plunge in Magellan’s share price and the worrisome events of recent months, the board will also be more wary of the so-called “key man” risk stemming from having one person serving multiple roles of such vital importance to the future of the company.

Mr Douglass was an executive director of Magellan since November 21, 2006.

He served as chair and chief investment officer until early February.

At that time Mr Douglass abruptly began an undefined period of medical leave “after a period of intense pressure and focus on both his professional and personal life”.

Magellan has endured a sustained period of poor investment returns since the start of the Covid-19 pandemic – leading to a significant outflow of funds under management.

The outflow of funds under management from Magellan culminated in the loss of its biggest investment mandate – St James’s Place, worth almost $23bn – in December 2021.

The company is also still searching for a permanent chief executive following the resignation of its former longstanding chief executive Brett Cairns in December.

Around the same time, Mr Douglass also suffered a messy separation from his wife, Alexandra.

The pair released a joint statement to the ASX in December to say that they had no intention to sell any of their shares in Magellan Financial Group.

Mr Douglass is by far the biggest shareholder of Magellan.

As of January 19 he owned 11.97 per cent of its shares on issue.

Now worth about $335 million, the market value of his stake two years ago was $1.66bn.

Last week the company launched an on-market buyback – funded by existing cash and financial assets – of up to 185.7 million (5.4 per cent) of its shares to “enhance value for shareholders”.

The buyback was previously announced at its interim results briefing on February 18.

Magellan also plans a 1-for-8 bonus issue of options to its shareholders with an exercise price of $35 per option. The options will have a five-year term and will be exercisable at any time until expiry.

Last month, Magellan’s board said it “wholeheartedly supports Hamish taking the time that he requires to focus on his health” and “looks forward to welcoming Hamish back”.

In the meantime, co-founder and former chairman and chief investment officer, Chris Mackay, is overseeing the portfolio management of Magellan’s global equity retail funds and global equity institutional mandates. Nikki Thomas remains co-portfolio manager of Magellan’s global equity strategies, including the flagship Magellan Global Fund.

Former deputy chairman Hamish McLennan, who was named independent non-executive chairman in place of Mr Douglass, said last month the board “wholeheartedly supports Hamish’s decision to prioritise his health and Magellan is committed to providing him the time and support he requires”.

From a record high of $74.19 in March 2020, Magellan shares fell 82 per cent over the next 2 years, reaching a 7.5 year low of $13.22 early this month.

Magellan shares fell 4.3 per cent to a two-day low of $15.06 after the announcement, giving it a market capitalisation of $2.79bn.

Magellan’s Board is continuing its search for an additional independent director.

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