Magellan shares fall after $3.2bn loss in funds under management

Magellan Financial says it lost $3.2bn from funds under management since its last update in early February, pushing shares more than 10 per cent lower.

Former Magellan chairman Hamish Douglass. Picture: Hollie Adams /The Australian

Magellan Financial said it had lost $3.2bn from funds under management since its last update in early February – as large institutional clients pulled their money – pushing shares more than 10 per cent lower on Friday.

In an update, the company said it had funds under management of $77.2m compared to $87.1bn when it last reported on February 11.

The change comprised the outflows, but also market movements and foreign exchange changes.

Since February 11, the company said, “Magellan has received notifications of intention to redeem of $2.1bn, which has been reflected in the above FUM figures”.

Magellan shares, which have already been under after significant leadership change, fell $2 – or 10.1 per cent – on Friday to close at $17.78. Its shares had traded as high as $70 in 2021.

Investment advisory firm Morningstar this week placed a Bronze rating on Magellan and warned the exit of former chairman Hamish Douglass had caused an increase in uncertainty.

“His indefinite absence exposes Magellan’s lack of succession planning across the investment team and the broader business,” Morningstar’s Chris Tate wrote.

“While there is considerable talent among the firm’s senior investor and analyst team, it has operated largely in the shadows to date. Staff retention is also at risk, contributing to a reduction in our conviction levels.”

Morningstar and other similar firms are used by financial advisers and other market players as they make decisions about how to advise their own clients.

Others, such as Zenith Investment Partners, two weeks ago downgraded Magellan’s global managed funds from “highly recommended” to “recommended”.

The market is bracing for further fund outflows from Magellan, with equities analysts warning personnel changes would “raise the risk of outflows near-term”. “While the stock is starting to reflect risks around key-person, outflows … and underperformance, there are still more questions than answers with respect to the outlook,” UBS told its clients.

Mr Douglass took a leave of absence to focus on his health but has not provided any indication of how long his leave may be or what he will do when he returns.