$19.1 billion in outflows later, Magellan sends another signal

Mike Taylor

Managing Editor/Publisher, Financial Newswire

18 October 2022

ANALYSIS

There is a key sentence in Magellan’s announcement about its leadership team changes which see David George appointed at Chief Investment Officer (CIO) as well as being chief executive officer and managing director while long-serving Gerald Stack becomes Deputy CIO.

That sentence is: “The appointments of Mr George and Mr Stack mark the conclusion of this transition”.

The transition being referenced is, of course, the transition of Magellan away from the dominant personality of former CIO, Hamish Douglass which began in earnest in February and has been ongoing.

But for many investors, the real signal of whether the transition has been concluded will be measured in Magellan’s monthly fund flows reports to the Australian Securities Exchange (ASX) and whether the succession of multi-billion dollars outflows has been staunched.

If investor and market sentiment towards Magellan is to be judged by fund flows, then it is worth reflecting that since March, this year, the fund manager has experienced $19.1 billion in outflows.

Perhaps just as importantly, there is little sign that the company’s succession of announcements regarding its leadership and senior management have done anything beyond slowing what has become a steady downward trend.

Here is the bottom line with respect to Magellan Funds Under Management (FUM)

March             $70 billion

April                $68.6 billion

May                 $65 billion

June                 $61.3 billion

July                  $60.2 billion

August             $57.6 billion

September      $50.9 billion

Magellan’s share price has been on a longer but steadier downward trajectory to be down from nearly $60 in June/July last year, to be sitting around $10.64 yesterday.

And it is worth reflecting that in early June, the company announced that Douglass would “resume working with the businesses in a new consultancy role” with George’s appointment as CEO and Managing Director being brought forward to 19 July.

It is against this background and Douglass’ status as a “consultant” that making George and Stack CIO and Deputy CIO respectively need to be seen in the context of Magellan seeking to send reassuring messages to the market about where the key investment decisions are really being made.

According to the company’s announcement to the ASX George had been assuming responsibility for Magellan’s investment functions since starting with the company, with this week’s announcement simply formalising that position.

However, it is the appointment of Stack as Deputy CIO which reinforces the Magellan messaging with Stack having one of the longest track-records and being one of the best-regarded portfolio managers in the listed infrastructure space.

The George and Stack appointments see Magellan co-founder, Chris Mackay, step back from the strategy into which he was injected amid Douglass’ substantial exit at the beginning of the year.