Three Magellan funds taken down a notch by Morningstar

Mike Taylor

Managing Editor/Publisher, Financial Newswire

19 October 2022

At virtually the same time as fund manager Magellan was announcing the appointment of Gerald Stack as deputy chief investment officer (CIO) major research and ratings house, Morningstar, was issuing its October 2022 real assets sector report downgrading his funds noting that he represented “meaningful key person risk”.

Notwithstanding its overall positive view of the Magellan funds led by Stack, each were downgraded by Morningstar from “gold” to “silver” meaning that of five funds downgraded by the ratings house in the Real Assets Sector, three were Magellan funds – Magellan Infrastructure, Magellan Infrastructure (Unhedged) and Magellan Infrastructure Currency Hedged ETF.

In each instance, Morningstar noted that the products in question remained a “strong proposition with a first-class approach” but said its “dimmer view of the overall business leads to the strategy falling a notch from its highs among the cohort”.

It described Stack as being “a meticulous investors and represents meaningful key-person risk given the esteem in which he is held”.

The other two funds to be downgraded by Morningstar were the Cromwell Phoenix Property Securities fund and the Resolution Capital Global Property Securities (WS) fund.

The funds to be upgraded in the sector by Morningstar were the ATLAS Infrastructure Australian Feeder Fund both hedged and unhedged, and the Macquarie Global Listed Real Estate H fund.

Morningstar noted a fee cut by ATLAS which had brought the fund more into line with competitors, while with respect to the Macquarie fund it noted that the strategy had been acquired along with the broader AMP Global Equities and Fixed Income business – something which had provided ownership certainty after a period of turmoil.

The Morningstar analysis also pointed to the leadership of James Maydew and the relative stability among the key investment leadership team.

Summing up its approach, Morningstar said that after its 2022 Real Assets fund manager annual review it had found three strategies that achieved ratings upgrades due to either Morningstar’s increased conviction in their investment teams, research capability and investment processes or “stronger assessment under our enhanced ratings system because of lower fees”.

“We downgraded five strategies because of reduced confidence in the investment team, diminished conviction in the investment processes, or lower assessment under our enhanced ratings system due to expensive fees.