Magellan picks Andrew Formica as new chair to replace Andrew McLennan in bid to reverse slump

Former market darling Magellan has announced Andrew Formica will replace Hamish McLennan as chairman, as the embattled fund manager seeks to turn around its struggling performance.

Magellan Financial Group has announced Andrew Formica will replace Hamish McLennan as chairman, as the embattled fund manager seeks to turn around its struggling performance.

Mr McLennan had only stepped up to the role of chairman in February 2022 to deal with a crisis enveloping the firm involving founder and former investment guru Hamish Douglass, who left suddenly in a swirl of personal controversy.

Turning the company around is proving more difficult than expected.

Magellan has shrunk from a $100bn-plus market darling to one with funds under management of only $39.2bn by the end of July this year.

Mr Formica has had significantly more industry experience than the outgoing chairman, having most recently been the chief executive of London-based Jupiter Fund Management.

He left the £55.3bn ($110m) company suddenly last year after two years in the role, declaring he would like to spend some time on the beach.

Before joining Jupiter he worked at Janus Henderson Group – formed through a merger of the Janus and Henderson groups – and left there after missing out on the top job of the newly combined group.

Mr Formica said he looked forward to “restoring Magellan to its rightful place as Australia’s leading fund manager”.

“I am deeply motivated to return Magellan to a growth footing,” he said in a statement.

Mr Formica’s acquisition experience may come to the fore at Magellan, where as recently as December last year outgoing chair Mr McLennan was promising growth through takeovers.

Magellan CEO David George, left, with Hamish McLennan, who will remain on the board as deputy chair. Picture: John Feder

The announcement of a new chairman comes just a day before Magellan is expected to post another slump in full-year profit. The market consensus is for profit to fall to $240.6m.

In that time he saw the company fall from a $100bn-plus fund manager under the guise of the seemingly Warren Buffett-style investor Mr Douglass, to one on a downward spiral and FUM down sharply.

Magellan’s troubles started when the company made a number of bad picks on US tech stocks but dramatically escalated.

Fund managers are looking to merge to stem the rising costs that come with a loss of scale from fund outflows, seen across the globe as a result of economic instability, and as more people move into exchange-traded funds that charge lower fees.

Mr McLennan sees Magellan as the hunter of other fund managers, but it could become the target if shareholder dissatisfaction remains high and the instability of its investment team continues.

Magellan shares fell 2.44 per cent to $9.20 on Thursday. The market closed before the new chairman was announced. Its shares have fallen 34 per cent in the past year as the company has failed to deliver on its promised turnaround.

While Magellan is struggling more than most, many in the industry are consolidating for scale as they struggle with tumultuous market conditions, a move by investors to lower paying passive funds and the cost of living crisis being exacerbated by rising interest rates.

In addition to the appointment of Mr Formica as chairman, Magellan announced a new director in Deborah Page and the resignation of Robert Fraser from the board.

Mr McLennan will remain on the board as deputy chairman.

He has been on the Magellan board since 2016 and is also the chairman of the Australian Rugby Union and the chair of REA Group, the digital advertising real estate company owned by News Corp, publisher of The Australian.

Magellan in July suffered another large outflow of funds under management, taking its total net reduction to $21.6bn over the past year.

The once high-flying global funds manager reported a net outflow of $2.1bn in its funds under management in June, including $1.7bn of institutional and $400m of retail money.

Magellan’s total funds under management fell to $39.7bn from $41.4bn in the final month of the 2023 financial year, a hefty drop of just over 5 per cent.

The group has seen its funds under management fall 35.2 per cent since June 2022, when they sat at $61.3bn.