Research house asks if the end is nigh for Magellan

Although Magellan is bleeding funds and one of its founders and chief investment officer has taken medical leave one research house says investors should not necessarily exit the funds.

Wednesday, February 9th 2022, 7:41AM

Australian-listed fund manager has been popular in New Zealand with advisers for exposure to global shares, but support maybe waning according to some in the industry.

Research IP has written a report, Is this the beginning of the end for Magellan? It records that in December alone Magellan lost close to A$23 billion in funds under management.

Its largest mandate, St James' Palace terminated its relationship with the manager, taking with it A$23 billion. A further A$1.1 billion was withdrawn by retail investors and A$460 million in redemptions from institutional clients.

"Yes these are all big numbers," Research IP says. "And it is likely there is more in the pipeline which will be a catalyst for more."

However, its says "Magellan is not going anywhere fast though." As at January 31, Magellan still managed A$93.5 billion.

Research IP acknowledged it is most recent report that there was "people" risk with the fund.

It ranked the key person risk in Douglass to be "relatively high, having significant responsibility as both the Chairman, Chief Investment Officer (CIO), and Portfolio Manager (PM) for this fund."

However, that is mitigated by the size of the investment team, processes and corporate governance.

"From our research scoring perspective, ultimately the corporate position and investment governance of the fund have not changed. The process and investment philosophy have not changed.

"People has changed, but this is mitigated by the size and depth of talent sitting in the team. Portfolio construction and implementation have not changed. Risk management has not changed. Lastly, fees have not changed."

On balance Research IP says where investors stick with the manager depends on a number of things.

"Some of you unfortunately may be given no choice, compliance will make the call. The path ahead for Magellan will not be easy and a few will need to work for their pay (and dividend) cheques, but a lot will depend on the flow of money."

Tags: Magellan