The company’s share price fell by about 9 per cent in morning trade on Friday after the release of another bleak funds under management update.
Magellan CEO David George is fighting to win back clients’ trust and stem the outflows that have plagued the business for months.Brook Mitchell
December outflows at Magellan were $2.6 billion,comprising of $0.6 billion in retail and $2 billion in institutional net outflows. That comes on top of $2.5 billion in outflows in November and $2.4 billion in October.
Funds under management now sit at $45.3 billion,a 10 per cent drop from $50.2 billion at the end of November. In mid-2021,the firm boasted funds under management of $113.9 billion. Magellan’s share price has fallen more than 50 per cent in the past year.
The fund manager is trying to recover from a troubled 2022 during which it shed billions in funds under management as senior management,including high-profile stock picker and founder Hamish Douglass,left the company.
New chief executive David George has emphasised that they are working to win back clients’ trust and stem the outflows that have plagued the business for months by focusing on “keeping it simple” and returning to its roots as a conventional funds manager.
He aims to return funds under management to $100 billion in five years.
The latest update showed that average funds under management for the last six months of last year was $53.8 billion,compared with $112.7 billion for same period the year before.
Performance fees for the six months ending December 31 were “not meaningful”,the company said. In last six months of 2021,performance fees were $11 million.
Magellan funds will pay distributions of $0.3 billion in January which will be reflected in next month’s funds under management figures.
The shaky end to 2022 comes after shareholders voted in favour of increasing fees for non-executive directors at a meeting in December. The increased cap for non-executive director is part of the company’s strategy to renew and expand the board.
Magellan aims to appoint two new non-executive directors to the board and wants to increase the fees of current directors Robert Fraser,Colette Garnsey,John Eales and chair Hamish McLennan.
Despite some pointed questions from shareholders,who asked why they should support the increase given Magellan’s share price had tumbled,the vote was comfortably passed with almost 95 per cent voting in favour of the resolution.
At the December meeting,the chair told shareholders that a lot of the outflows had been caused by the “instability of Hamish’s departure”.
“And there were a lot of institutional relationships that were tied to Hamish that,no matter what anyone could have said or done,I think was a difficult situation for the board to get their heads around,” he said.
Douglass,who split from his wife at the end of 2021 before announcing he was taking medical leave after “intense focus” on his personal and professional life,has returned to the firm as a consultant,not an employee.
Morningstar downgraded Magellan stocks several months ago,saying performance at the asset manager had not materially improved since it began in late 2020.
Analyst Shaun Ler said that its competitive position was unlikely to be regained and the road to regaining new money would be challenging and likely take years.
More broadly,structural challenges in the asset management sector,including competition from the rise in popularity of exchange-traded funds,fee pressure and continued outflows,saw investor sentiment sour towards listed funds managers last year.
In its outlook for the first quarter of 2023,Morningstar analysts said funds under management at these firms had shrunk because of market volatility,but while earnings will be hurt,they believe fund performance will improve and earnings recover in the medium term.
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