The Magellan Financial Group Ltd (ASX: MFG) share price has seen big movements today after it was announced that co-founder Hamish Douglass had sold Magellan shares.
Former billionaire Hamish Douglass was one of the founders that created Magellan almost two decades ago.
Share sale
Magellan has been informed by Hamish Douglass that an entity associated with his family has sold approximately 13 million ordinary Magellan shares.
The partial share sale was carried out yesterday evening, through an after-market block trade at a price of $9.10 per share.
Magellan said that it has been informed that the Douglass family entity has entered into an undertaking with a Barrenjoey Group entity that did the block trade, not to sell any more Magellan shares in the next 12 months.
Why did Hamish Douglass sell Magellan shares?
The fund management business noted that Mr Douglass has further advised that the rationale for the partial share sale was for family diversification purposes.
Mr Douglass said:
I have full confidence in the Magellan investment team including the global equities team led by Nikki and Arvid. Consistent with my confidence in the team I have not sold any of our investments in any Magellan funds.
This is an interesting development considering Hamish Douglass started a consultancy role just over a month ago on 1 October. This would “enable him to deliver his expertise to investors free from board, management and portfolio responsibilities.”
Some thoughts
The Magellan share price has sunk around 50% since the beginning of the year.
Earlier today, it had fallen around 5%. But then from that low point, the business jumped 7.6% to be 2.6% up for the day. It’s currently up by 0.8%.
The problem for Magellan is that its total funds under management (FUM) has sunk to $51 billion. October 2022 showed FUM net outflows of $2.4 billion.
If FUM keeps falling then profit is dropping, worsening its profit potential. The fact that the profit is so heavily influenced by the FUM means that investors can’t see a ‘bottom’ for the Magellan share price decline yet.
Until it stops losing FUM, perhaps when it delivers some consistent outperformance, I’m not sure when this pain stops. The move away from the Magellan Capital Partners investment strategy has hurt the company’s long-term potential in my opinion.
