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Embattled fund manager Magellan has announced a special dividend to reward investors but continues to see funds under management bleed as the company struggles to revive its once high-flying status and profits.
On Friday, Magellan’s newly appointed chairman Andrew Formica said the company could deliver on its five-year plan to rebuild its funds under management to $100 billion by adding more talent to its investment team.
Magellan chief executive David George said he was confident that Magellan would reach its goal of $100 billion in funds under management.Credit: Brook Mitchell
“We’ve got some fantastic investors here already, and I’d love to add to that in terms of the business,” he said. “Doing so will enable us to get towards those targets that David George set and deliver on our five-year plan.”
Magellan on Friday reported statutory net profits fell 52 per cent to $182.7 million, after a year in which funds under management also tumbled by almost half following a tumultuous period for the company.
It also announced a special dividend of 30c a share as it looks to return capital to shareholders, and it said there had been an improvement in the performance of its flagship global fund.
Magellan shares were up 17 per cent to $10.80 a share at about 11.40am, as the company also flagged that it would cut costs in the current financial year.
George, the company’s chief executive, was appointed to the role last year to steer Magellan’s turnaround after a troubled 2021 in which the company’s share price tumbled due to investment underperformance, and departures from senior management, including high-profile stock picker and founder Hamish Douglass and a former chief executive Brett Cairns.
Magellan closed off the 2023 financial year with $39.7 billion in funds under management, down from $61.3 billion the previous year and $113.9 billion in 2021, and posted net profit of $182.7 million, down 52 per cent from the previous year.
The bulk of the outflows came from institutional investors who left the fund with $21.3 billion as of June, down $17.8 billion on the previous year, with a $3.8 billion outflow from retail investors.
Magellan’s global equities fund, which accounts for more than half of its funds under management, saw outflows slow from $13.3 million to $4.8 million in the second half, as its performance improved. The global equities fund returned 20.6 per cent – below its benchmark of 22.4 per cent – over the year, but outperformed the benchmark in the six months to June.
Magellan shares were up 15 per cent in morning trade.Credit: Louie Douvis
Magellan also announced Fornica, a former funds management executive, as its new chairman on Thursday night, and on Friday it also said George would no longer be chief investment officer as well as CEO.
UBS analyst Shreyas Patel described the special dividend, the company’s lower funds management costs, and the governance changes as “significant positives.”
George said the improved performance of the fund was a result of the team working better together, with shorter and more frequent meetings.
“The conversations are really lively and dynamic, and so you’re seeing some new ideas come into the portfolio and be considered,” he said.
While George said it was hard to say exactly when funds under management would begin to grow again, he said he was confident that Magellan would reach its goal of $100 billion in funds under management.
“I’m confident that we can get there,” he said. “Exactly when funds grow is always about clients and those decisions. The things we can do, though, is ensure we’re executing and delivering performance and service with excellence. If we’re doing that, and we sustain that, then the turn around should come.”
Formica said Magellan had a strong balance sheet and that acquisitions could be valuable for building investment talent, but that it would not be the sole strategy or highest priority for the company.
“I want us to be the home of the best investment talent and that can come through us hiring new talent and teams including acquisitions, so they should definitely be a component that we consider,” he said.
Looking to the year ahead, George said there would be many macroeconomic headwinds but that it presented opportunities for active fund managers.
“Inflation will probably stay higher for a bit longer than everyone will be comfortable with, and therefore interest rates will,” he said. “That impacts different parts of the economy and different businesses, differently. Really well-run businesses can differentiate, but it’s not going to be the easiest time for the broader market, so I think it’s a good time for active management.”
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