Hamish Douglass cashes out of Magellan Financial

The company’s former chairman has sold two-thirds of the holdings in the group he co-founded, but says he has ‘full confidence’ in how it is being run.

Former Magellan Financial chairman Hamish Douglass has cashed out the majority of shares his family owned in the embattled funds manager one year after he told the company he had no intention of selling down his holding.

Mr Douglass, who left the company in difficult circumstances following his public separation from his wife Alexandra, confirmed on Tuesday that he had sold $118.3m in Magellan shares – some two-thirds of the family’s holdings.

The partial selldown of 13 million shares at $9.10 each was made through an aftermarket block trade on Monday. Shares rose 0.4 per cent, or 4c, to close at $9.67 on Tuesday after recording a fall earlier in the day. They are 69 per cent, or $21.67, lower than this time last year, having traded as high as $65 before the pandemic.

In a statement, Magellan said it had been informed that a Douglass family vehicle had “entered into an undertaking with a Barrenjoey Group entity that undertook the block trade not to sell any additional shares in Magellan for 12 months”. “Mr Douglass has further advised that the rationale for the partial share sale was for family diversification purposes,” the company told investors.

Mr Douglass said he had “full confidence in the Magellan investment team including the global equities team led by (portfolio managers) Nikki (Thomas) and Arvid (Streimann)”. “Consistent with my confidence in the team I have not sold any of our investments in any Magellan funds,” Mr Douglass said on Tuesday.

Mr Douglass left Magellan in February – when he was replaced by REA Group chairman Hamish McLennan – having become the executive chairman of the ASX-listed funds management giant in 2018 when he swapped roles with Brett Cairns, a co-founder who became chief executive.

Mr Douglass had come under increasing pressure after the departure of Dr Cairns in early December. Dr Cairns, who was at Magellan for 13 years, left for “personal reasons”. While Mr McLennan is now the company’s chair, it is led by ex-Future Fund executive David George, who is also chief investment officer.

Mr George declined to comment on Tuesday.

Before Mr Douglass exited the business – but after it was revealed he was separating from his wife – the then Magellan chairman told investors that the family “have no intention to sell any of our shares”.

A family vehicle – Midas Touch Investments – has been the second largest shareholder.

In late October, Morningstar joined Lonsec and Zenith in placing multiple funds run by Magellan on ratings watch, after the company said co-founder Chris Mackay would no longer run the global equities strategy and several investment staff also exited.

All three ratings companies – the most used by investment advisers – had previously warned that Magellan required stability at an investment-team level.

Despite Magellan underperforming on a one, three, five and 10-year basis – and now the departure of both key men in Mr Douglass and Mr Mackay – none of the three major rating companies has recommended taking money out of Magellan funds yet.

That month, the company disclosed more outflows, with institutional funds removing $3.2bn from Magellan in September.

In all, the company’s funds under management has fallen to $50.9bn – $31.1bn of institutional funds and $19.8bn in retail money – compared to $57.6bn at the end of August. Of the $6.7bn fall, outflows accounted for $3.6bn.

In the past 12 months Magellan has lost about $62.4bn in funds under management. The vast majority of that – $52.2bn – has been in institutional funds.

In October, Morningstar equities analyst Shaun Ler said he was not surprised that institutional money was flowing out of the fund given the volatility in markets.

“If we look at the entire equities asset class, there’s just been massive redemptions right across the world. Because of all the volatility, a lot of institutions are rebalancing their portfolios,” Mr Ler said.

“Some of these insto redemptions can be due to fundamental issues, but for some it’s really just due to this loss of risk appetite.”