Magellan Financial taps Rahmani as new CEO

Under-fire asset manager Magellan Financial has recruited Sophia Rahmani from Maple-Brown Abbott as CEO in a bid to turn around its fortunes.

Magellan Financial Group executive chairman Andrew Formica has stamped his authority on the funds management behemoth by naming his former underling Sophia Rahmani as its new chief executive, in a move he hopes will turn the former market darling’s fortunes around.

It’s another formative move from Mr Formica, who was only on the Magellan board for two months before deciding that David George lacked the “expertise or experience” to remain as CEO despite previous roles at the Future Fund and as a management consultant.

Ms Rahmani, who resigned as boss of Maple-Brown Abbott to take the reins at Magellan, will have her work cut out.

On Thursday, Magellan posted a 5 per cent drop in adjusted first half net profit to $93.5m.

As of January 31 funds under management sat at $36.3bn, less than half of the figure two years prior but slightly up on the previous month.

“She really understands the fund management industry and she’s very strategic in what she does,” said Mr Formica.

“She’s certainly got a lot of energy. She has sleeves rolled up and is not someone who just delegates off others. She’s prepared to do everything herself that she would ask of anyone else.”

Most active fund managers have had a difficult few years as investors switched to cheaper and often better-performing exchange-traded funds. Rivals Platinum Asset Management and Perpetual have also struggled to stem outflows, though Magellan’s fall from grace has been more ­extreme.

The firm has been hammered since the controversial departure of founder Hamish Douglass – who once had a near cult status in Australia – followed by a brief intervention by fellow founder Chris Mackay, and the loss of key investment staff.

Magellan chair Andrew Formica. Picture: Britta Campion

The firm then hired Mr ­George from the Future Fund, who only lasted 17 months before then-newly appointed Mr Formica decided he wasn’t the right person to stem the outflow of funds or stop the departure of key stock pickers.

Magellan shares have risen about 50 per cent since Mr ­George departed to close at $9.32 on Thursday, up 4.4 per cent for the day.

Ms Rahmani will initially run Magellan Asset Management, starting in May, and then be appointed to run the entire company “within 12 months,” Mr Formica said. The stepping stone approach has been done to appease investors fed up by the revolving door at the top, with the firm effectively having four CEOs within about three years.

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‘She is an exceptionally experienced hire who clearly has experience in funds management’

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Investors and staff have backed Mr Formica to make the necessary steps to stop the outflows at Magellan. The chairman was previously at Jupiter Fund Management and Henderson in London before returning to Australia. “The most important thing is that you’ve got someone who lives and breathes these kinds of businesses,” said activist investor Gabriel Radzyminski from Sandon Capital, which owns Magellan shares.

Ms Rahmani worked for Mr Formica a decade ago at Janus Henderson Group, though her reporting line was to Rob Adams, now the CEO of Perpetual, who reported to Mr Formica. She has been the CEO of MBA for the past four years.

“She is an exceptionally experienced hire who clearly has experience in funds management,” Mr Radzyminski said, adding he was “already seeing signs” Magellan had “stabilised their existing FUM.” On Thursday, Magellan said interim revenue fell 15 per cent to $169m and basic earnings per share decreased by 4 per cent to 51.6c. The company has a 36 per cent shareholding in Barrenjoey, the fledgling investment bank set up by Brian Benari with former UBS stars Matthew Grounds and Guy Fowler.

Mr Formica said Barrenjoey posted its first profit since being set up three years ago, off record revenue, which rose 35 per cent over the period, and the fund manager increased its carrying value in its shareholding of Barrenjoey to $127.58m.

Magellan did not break down the numbers but revealed a $3.1m profit from associates, up from a loss in the previous period, which is believed to have come from the investment bank start-up.

Statutory profit rose by 24 per cent from the previous corresponding period to $104m. Magellan will pay an interim dividend of 29.4c per share, down 37 per cent on the previous corresponding period.