Magellan Financial fund outflows hit $30bn in five months

The high-profile money manager’s shares have slumped after another month of outflows as instability continues following the departure of star stockpicker Hamish Douglass.

Hamish McLennan has been Magellan Financial’s chairman since the departure of Hamish Douglass. Picture: Britta Campion

Magellan Financial shares fell more than 13 per cent on Monday after the company disclosed a $3.6bn reduction in funds under management over the last month.

Magellan, in an ASX update, said it had funds under management of $65bn – down from $68.6bn on April 29.

The largest decrease was $2.4bn out of institutional funds managed – down from $43.8bn to $41.4bn – while retail funds slumped from $24.8bn to $23.6bn.

It is the first update since Magellan tapped Future Fund veteran David George as chief executive and managing director following the departure of founders Brett Cairns and Hamish Douglass, the company’s chief investment officer and chairman.

Mr George is due to start in August.

The departure of Mr Cairns and the instability with Mr Douglass – a major shareholder who disclosed he had separated from his wife – preceded the December decision of St James’s Place, Magellan’s largest mandate, to pull its money.

The investment team is now managed by Chris Mackay, another co-founder who was chief investment officer until 2012.

Under Mr Mackay, the company has begun to offload assets including an 11.6 per cent holding in Guzman y Gomez, which it sold on May 9 to Barrenjoey Capital Partners for $140m.

UBS, which has recommended clients sell Magellan shares and has a price target of $13.50 on the company, said the investment “may be a strategic distraction from its core asset management business, but its key investments are proving well-timed”. Magellan’s stake in Barrenjoey, the UBS analysts said, was now worth roughly $33m, about double what it paid in September 2020 – some $156m.

“We expect an orderly realisation of other investments, noting its Guzman y Gomez stake was recently realised for $140m vs. $103m invested, and its $20m investment in FinClear is reported to be worth $125m,” analyst Shreyas Patel.

In a note published on May 18, however, Mr Patel said the April funds under management figures “suggested some signs of stabilisation in institutional flows”.

Between December 31 and May 31, more than $30bn has left the Magellan business. Investments managed for institutional clients have fallen $23.2bn.

Magellan shares ended 13.8 per cent lower on Monday, falling $2.04 to close at $12.89. They have fallen 32.3 per cent since December 31 and almost 71 per cent in the last 12 months.

Mr Douglass in March tendered his resignation as a director from Magellan’s board, in a move linked “solely due to his medical leave of absence”. His decision to step away followed the abrupt exit of Mr Cairns. That same month Mr Douglass was forced to confirm he had separated from his wife, but said there was no intention to reduce their Magellan shareholding.

Asked in February what steps Magellan was taking to address any future fund outflows, chairman Hamish McLennan said: “We expect there to be some FUM outflows, just to be ­realistic, but I think the most important thing from a lot of the conversations that we’ve had – and Chris’s attitude toward the portfolio as it stands … it’s steady as she goes.”

Despite its personnel and performance woes Magellan reported net profit after tax for the six months ended December 31 of $251.6m, up 24 per cent on the same period a year earlier.