Aug 17, 2022

Share New Magellan chief executive officer David George says the embattled asset manager has the scale to remain competitive as it seeks to put a horror year, in which its funds under management halved, behind it. Magellan on Wednesday reported a 3 per cent fall in adjusted net profit after tax of $399.73 million for the full year, broadly in line with analysts’ forecasts of $401 million. The fund manager reported a 44 per cent increase in statutory net profit, which was due to a $148 million tax expense in 2021 that lowered its comparable reported profits. But that figure was at odds with a nightmare year for Magellan as its funds under management almost halved from $117 billion to $60 billion, forcing a sharp revision of future earnings. Those outflows were a result of persistent underperformance of its main global funds and the turmoil and ultimate departure of co-founder and chief investment officer Hamish Douglass. Advertisement “Changes to Magellan’s leadership team and personnel, as well as relative underperformance in the global equities strategy, have impacted client confidence and contributed to a period of declining funds under management and profitability,” new chief executive David George told shareholders. Magellan declared a dividend of 68.9¢ per share for the six months to 30 June 2022 and 179¢ for the full year – that’s 15 per cent lower than the 224¢ in interim, final and performance dividends paid to shareholders in 2021. Shares in Magellan slid 6.8 per cent to $13.97 in early trade. CEO has two priorities Mr George, who joined the firm from the Future Fund where he was deputy chief investment officer formally assumed the role a few weeks ago, said he has two priorities – to work with the investment team and to seek feedback from staff and stakeholders at the firm. Advertisement He said he would “share his thoughts in October” which means investors will have to speculate until then about any major strategic initiatives. Prior to Mr George’s appointment, Magellan told investors it would make no further principal investments in its Magellan Capital Partners unit. It subsequently divested its 11.6 per cent holding in Mexican fast food chain Guzman y Gomez, netting $140 million. Magellan remains a 16 per cent shareholder of Finclear and has a 36 per cent economic interest in investment bank Barrenjoey. Magellan said Barrenjoey delivered a “modest profit for the year” while the overall contribution from MCP was $8.4 million. Chairman Hamish McLennan and Mr George sought to emphasise that even as Magellan shed $60 billion of assets, it remained large and globally significant and financially strong. “The strength of Magellan’s balance sheet provides us with significant headroom to invest in our business to deliver for our clients and position ourselves for future growth,” Mr George said. Advertisement While the Future Fund took a dim view of active equities managers , replacing all Australian and global mandates with low-cost passive and factor-based strategies, Mr George backed the resources and abilities of Magellan. “The end of monetary expansion marks a change from the time when money flows pushed all asset values upward,” he told shareholders. “Such a volatile and difficult environment should reward outstanding fundamental company research and active management of portfolios, qualities that are trademarks of Magellan products.” Magellan’s shares have fallen 30 per cent so far this calendar year and are 70 per cent lower over 12 months as both retail and institutional investors have pulled money from Magellan’s main global funds. Assets under management almost halved from $117 billion to $60.2 billion. However, the shares have rallied 35 per cent from a 52-week low of $11.10 hit on June 14. Jonathan Shapiro writes about banking and finance, specialising in hedge funds, corporate debt, private equity and investment banking. He is based in Sydney. Connect with Jonathan on Twitter . Email Jonathan at jonathan.shapiro@afr.com Save