UK meltdown incinerates Magellan as client withdraws $1.6 billion

The fund manager has since announced that Douglass will return as a consultant rather than an employee.

Future Fund’s former deputy chief investment officer, David George, has been named its new chief executive, and the company says it is now working to regain customer confidence and stem the outflows that have plagued the business for months.

George, who took the helm at Magellan in July, will provide a more detailed update on his vision for the company at the October AGM.

Jun Bei Liu, a portfolio manager at Tribeca Investment Partners, said investors were looking to George to reassure him that he is the right person to stem the bleeding.

“I think the strategic update is very important to restore some kind of trust,” she said.

“Right now we just haven’t really heard about the new strategy, the new team and their vision.”

Liu added that it is very difficult to stop such outflows after investors started withdrawing en masse, saying Magellan’s funds under management are likely to trend further down.

“Based on the current rate of outflow, it doesn’t appear to be slowing down,” she said. “So you’re always going to get another consensus downgrade, much lower than today.”

Last month, Morningstar downgraded Magellan, with equities analyst Shaun Ler saying he underestimated the market disruption of Magellan’s investment style and saying its performance hasn’t improved significantly since late 2020.

“We also underestimated the downside of Magellan brand dilution, which is reflected in mandate losses and outflows. Even if Magellan improves its track record, its competitive position is unlikely to be regained,” he said.

Ler said the incoming CEO wants to adapt Magellan to an increasingly competitive landscape, which is positive, but “the journey will be challenging.”

“For Magellan to consistently win back new money, it has to outperform; further diversification of portfolio management responsibilities to dilute risk from key individuals; add more differentiated products; regain its position in model portfolios; and regain its strong fund ratings and reputation,” he said.

“These milestones will be challenging and will take at least years to reach.”

With Angus Thomson

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Brian Lowry

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