Hostplus yanks Airlie mandate as Magellan endures $2.4bn in fund outflows

The industry fund giant is the latest to pull a mandate from under-pressure manager Airlie, owned by Magellan Financial Group, which was again hit by outflows in April.

Industry fund giant Hostplus is the latest customer to pull a mandate from under-pressure equities manager Airlie, owned by Magellan Financial Group, which was hit by $2.4bn of outflows in April.

After fielding questions from The Australian, a Hostplus spokesman said: “We can confirm that we pulled the mandate after an extensive review.”

Hostplus’ latest annual report showed it had mandates with Airlie, including its active Australian equity strategy and industrial Australian equity strategy. Sources said that combined, the Hostplus mandates with Airlie reflected funds in the order of $1.3bn.

The latest mandate withdrawal follows two funds – one of which was HESTA – pulling billions of dollars from Airlie in March, after industry stalwart John Sevior announced he planned to step down in June. He hands the baton to lieutenant Matt Williams and new deputy Emma ­Fisher at that time, which has sparked unrest among some of Airlie’s large customers.

The Australian foreshadowed HESTA’s exit and flagged Hostplus was among funds weighing its Airlie mandate.

Of the $2.4bn of fund outflows for April, more than half can be attributed to domestic unit Airlie following the upcoming key personnel changes. Airlie’s funds under management have now halved, from the $9bn they stood at in February to $4.5bn at April’s end.

The Australian equities division – or Airlie – saw funds under management drop $1.5bn in April, while Magellan’s global equities strategy saw an increase by $200m to $20.9bn and infrastructure equities increased by $800m to $17.3bn.

The outflows included net institutional outflows of $2bn and net retail outflows of $400m.

Magellan’s total FUM now sits at $42.7bn, which is a far cry from its heady $100bn-plus days that the company plans to return to.

Airlie Funds Management portfolio manager Matt Williams.

The company’s investors took the fund update in their stride on Thursday, and the stock rallied 3.4 per cent to close at $8.30.

Despite the exit of other Airlie customers, UniSuper investments chief John Pearce last month threw the fund’s support behind Mr Williams.

“UniSuper’s mandate with Airlie remains intact. Matt Williams has done an excellent job and we have full confidence in Matt and his team to continue delivering results,” he said at the time.

The April fund outflows comes just a month after Magellan chief executive David George, in an email to staff, defended the firm’s handling of the changing of the guard at Airlie, including the promotion of new deputy Emma ­Fisher to work with Mr Williams.

“We felt the well-planned succession offered a compelling case for clients to transition to Airlie’s new leadership and portfolio management structure,” ­George wrote.

“Ultimately, the transition put a decision point in front of a group of clients and, while some have stayed, others have moved on.”

Former Magellan chair Hamish Douglass. Picture: Britta Campion

The past two years have marked a horror period for Magellan that included the exit of former CEO Brett Cairns, and chairman and chief investment ­officer Hamish Douglass, who also co-founded the company.

Mr Douglass left under controversial personal circumstances that also followed a period of bad bets on US tech stocks. His fellow co-founder Chris Mackay briefly stepped in to replace Mr Douglass, but did not remain in position for long.

The management upheaval was accompanied by tens of billions of dollars in outflows, including a key $23bn St James’s Place mandate.

Domestic fund managers have had to navigate a tough climate in the past five years as many large industry super funds take more of their equities investment management in-house and retail investors have flocked to cheaper, passive investment types.

Magellan acquired Airlie in 2018 and kicked off the Australian share fund months later.

In February, Mr George talked up Magellan having “great existing opportunities” in its infrastructure fund and at Airlie.