Magellan in major portfolio manager shake-up

The arrival of new chief executive David George has also led to the removal of managers at the company’s high conviction trust and core international fund.

Magellan CEO David George now has all the key responsibilities. Picture: John Feder

Magellan Financial has made redundant 10 of its staff, including senior portfolio managers and investment-related employees, as it overhauls its business.

The funds management group on Monday said David George, its chief executive, had also been appointed chief investment officer, formalising the full takeover of responsibilities held by its former chairman Hamish Douglass.

That means Magellan co-founder Chris Mackay will step back from the oversight role he has held ever since the abrupt exit of Mr Douglass under acrimonious circumstances in February.

Separately, Nikki Thomas and Alan Pullen will take over as managers of the Magellan High Conviction Trust, replacing Chris Wheldon and Michael Poulson.

The changes have been put in place by Mr George, who arrived at the company from the Future Fund. Separately, Elisa De Marco replaces Vihari Ross as portfolio manager at Magellan’s Core International Fund.

Magellan shares tumbled 4 per cent in intraday trade before paring a portion of the losses to close down 2.2 per cent at $10.78.

Mr George’s appointment comes as Magellan bleeds funds, with the global manager’s latest update showing its funds under management had tumbled to $50.9bn in September, down from $57.6bn at the end of August. Of the $6.7bn decline, outflows accounted for $3.6bn.

Magellan has now lost, in the past 12 months, $62.4bn in funds under management. The vast majority – $52.2bn – has been in institutional funds.

Magellan chairman Hamish McLennan said he was confident Mr George and the rest of the investment team would achieve strong client outcomes over the coming years.

“David has brought outstanding investment management pedigree and a fresh perspective to Magellan’s investment team,” he said. “Since his commencement … David has engaged closely with Magellan’s investment team, applying his extensive experience to build on the efficiency and excellence of our investment activities.”

Hamish Douglass has joined Magellan as a consultant. Picture: Britta Campion

Mr George takes up the job after a period of underperformance for the investment manager.

Magellan’s flagship global equities fund has underperformed over one, three, five and 10 years, due in part to its exposure to out-of-favour technology stocks including Alphabet, Microsoft and Netflix. Even if Magellan improves its track record under Mr George, there are doubts in the market that it can regain its competitive position.

“Combined with an abundance of alternatives, Magellan has matured in the global investing space, in the Australian context. Its above-average retail fees are becoming difficult to justify,” Morningstar analyst Shaun Ler recently told clients.

The retail money flowing out of the fund is more of a concern than the institutional flows, he warned. “The retail redemptions, that tells another story. Retail clients and their advisers have been very loyal to Magellan. And seeing them redeeming consecutively, that tells us that people are moving on; they’re looking for alternatives.”

Mr George, who joined the investment manager in July, was previously deputy chief investment officer at the Future Fund, where he oversaw an asset base of more than $170bn.

Mr George also now has a new deputy CIO in Gerald Stack, who leads the team responsible for Magellan’s global listed infrastructure business, managing $16.8bn in assets. Mr Stack has been with Magellan since 2007.

Co-founder Chris Mackay had helped steady the ship since February.

The appointments will allow co-founder Chris Mackay step back from his oversight role of the global equities strategy, which he took on in Mr Douglass’s absence, the fund manager said.

Mr Mackay had stepped in at the request of the board in February to provide immediate support to the investment team during a period of transition at Magellan.

“As an important part of the Magellan family, Chris remains a resource to me, Magellan’s portfolio managers and the investment team as needed, as well as Magellan clients,” Mr George said.

As Mr Mackay moves away from investment oversight at the fund, Mr Douglass makes his comeback at Magellan after leaving the business under a swirl of controversy earlier this year.

He returns to the inner fold this month and will pocket $400,000 a year for his investment expertise in his new role as an investment consultant to the fund manager.

He will provide consulting services from October, but won’t start earning the consulting fee until February 7, a date that aligns with the notice period of his previous roles.

Mr Douglass is Magellan’s biggest shareholder, with an 11.65 per cent stake. In the 2022 financial year, during which he served as chairman until February 7, his take-home pay was $2.73m.