GQG Partners is no Magellan says Morningstar

Mike Taylor

Managing Editor/Publisher, Financial Newswire

17 May 2023

Boutique fund manager, GQG Partners may have suffered some underperformance but it is not in the same degree of strife as Magellan, according to research and ratings house, Magellan.

In an analyst note issued this week, Morningstar said that, in its view, GQG’s “current near-term underperformance is unlikely to lead to sustained redemptions, which was the case with Magellan”.

In doing so, it said that this assessment was based on past underperformance by the fund manager having been short-lived and GQG “is not wedded to a specific style and [Chief Investment Officer] Rajiv Jain tends to make swift portfolio changes, meaning we don’t see it suffering from style headwinds as acutely as typical ‘growth’ or ‘value’ managers.

“Second, team stability remains and there are no reputational fallouts that warrant mass redemptions. Jain and CEO Tim Carver remain, while recent portfolio manager promotions were enacted to reduce GQG’s reliance on Jain,” the Morningstar analysis said.

The ratings house lowered its fair value estimates for GQG Partners to $1.90 per share from $2 and said that, despite this, the shares continued to screen as cheap”.

“GQG Partners is the only boutique manager among the asset managers under our Australia and New Zealand coverage that has a strong long-term track record and continues to garner net inflows. The sheer scale of GQG’s funds under management, at close to US$99 billion, means it is capable of growing earnings from the compounding of portfolio returns even if net flows went to zero. This is barring any strategic missteps or key person risk coming to pass, for example, if CIO Rajiv Jain were unable to perform his duties,” the analysis said.

“We reduce our projected cumulative net inflows from 2023-2027 by around 20%, which lowers the cumulative operating income by roughly 5%. We expect near-term net inflows to soften due to GQG’s subdued performance starting from the end of 2022, alongside the industry-wide redemptions from listed equities managers. Net inflows over the four months to April 2023 were USD 5.4 billion, though April’s were noticeably smaller at USD 400 million.”