The Magellan Financial Group Ltd (ASX: MFG) share price has jumped 13% over the last two days.
What’s going on with the Magellan share price?
The last six months have been very painful for one of Australia’s most famous fund managers. It has declined 63% in that time.
Quite a lot of that decline was investors getting nervous about the ongoing underperformance of the global share market. No-one likes seeing their portfolio miss substantial opportunities. Would it lead to investors pulling out their money? Or Magellan having to lower fees?
But then Magellan announced that it had lost the investment mandate of St James’ Place. That loss represented approximately 12% of its annual revenue.
But that hasn’t been the end of the funds under management (FUM) decline. Over January 2022, FUM fell another $2 billion to $93.5 billion. Ouch.
Hamish Douglass steps down
Earlier this week, it was announced that Magellan Chair and Chief Investment Officer Hamish Douglass would be taking a period of medical leave to prioritise his health after intense pressure and focus on both his professional and personal life. The Magellan share price dropped further after Mr Douglass’ move.
Original investment team returns
At the request of the Magellan board, Magellan co-founder Chris Mackay is going to oversee the portfolio management of Magellan’s global equity retail funds and global equity institutional mandates. He was the first Chair and was the chief investment officer from Magellan’s inception in 2006 to 2012.
Mr Mackay has been the ongoing Managing Director and portfolio manager of the listed investment company (LIC) MFF Capital Investments Ltd (ASX: MFF) since 2013.
MFF shares offices with Magellan and Mr Mackay has a long-standing and constructive working relationship with Magellan’s investment and support teams, according to Magellan.
But wait, there’s more.
Ms Nikki Thomas has rejoined Magellan as a co-portfolio manager of Magellan’s global equity strategies. She joined Magellan in January 2007 and was involved in the global equity strategy from its inception in July 2007 until December 2017. She is credited with being instrumental in the development of the company’s investment processes.
Hamish McLennan has been appointed as the independent, non-executive Chair.
My thoughts on the Magellan share price and these changes
It has been a highly disappointing period for Magellan. Positioning themselves too defensively after the crash (and picking the Chinese stocks) has hurt performance and the reputation. Even if it has succeeded in its net returns goals of 9% per annum.
The Magellan share price has been hurt significantly. But there comes a point when it could go too far down. Perhaps Mr Mackay and Ms Thomas will be able to get Magellan’s funds outperforming again. That would be a major help to shore up FUM.
But it won’t be easy. According to reporting by the Australian Financial Review,
the research house Lonsec has put eight of Magellan’s global equities products on ‘fund watch’. This could have a negative impact on fund flows from financial planners. A negative rating could lead to more disappointment.
However, it has/had fallen enough that investors may now think it’s good value. I do believe that the external businesses like Barrenjoey, Guzman y Gomez and FinClear will add a lot of value over time.
I’m backing Chris Mackay to be able to turn things around, but most/all of the large decline of the Magellan share price is justified and it won’t be an easy recovery. This isn’t one for the faint-hearted from here.
