Magellan’s turn around
Since the departure of founding CEO Hamish Douglas in 2022 the ASX listed fund manager, Magellan Financial Group Ltd (ASX: MFG) share price has languished, floating between $9 and $10 a share. A far cry from the lofty heights of $70 a share back in 2020.
Today I will be recording an episode of the Australian Investors Podcast with Alan Pullen, Co-Portfolio Manager for Magellan Financial Group’s global equity strategies. Alan and I will be talking about investing and a handful of the companies in the funds he oversees, but I am fascinated with the turnaround story of the business of Magellan.
It is all too easy to throw out the old Warren Buffett line of, turn arounds seldom turn, but given the company is top of my mind this morning I thought I’d take a closer look.
Magellan’s turn around strategy
It has taken us just over three years to get to this point but Magellan now has a clear strategy. The key pillars come down to:
- Rebuilding and diversifying revenues beyond legacy global equities: Magellan is rebuilding current funds whilst diversifying by partnering with outside fund managers such as Airlie – which has been the case study that they can do this – and recent addition Vinva. Playing to the core strengths of Magellan’s distribution network and brand. Simply put, they have a large platform for distribution, if you’re an adviser or intermediary you’ll take a call from Magellan. This is similar to a Pinnacle Investment Management Ltd (ASX: PNI) approach, where you provide sales and administration support and let the investment team focus on what they’re good at.
- Double down on distribution: The US has been flagged as a key growth market and Magellan is bringing forward investment in the global sales engine. Investing in funds management businesses is relatively simple, you want to hold them when they’re growing funds under management. To do that, you either have a rock-star fund manager people are drawn to or a well oiled sales machine.
- Cultivating culture and attracting top talent: This one goes without saying, it was a hard fall in 2022 and it would have been difficult to stomach for those in the business. Share price performance though, is not a companies culture. A new employee share scheme is in place and a re-focusing on client first core values is being pushed.
Watching the turn around turn
It goes without saying with a fund manager, net flows will be the ultimate test. We will be keeping a close eye on inflows into Vinva through Magellan’s distribution channels and looking for a rising contribution from Magellan’s partners.
We will want to see the investment in sales and distribution platform pay off and as spend on this rolls off we’ll expect to see operating leverage.
Finally, we will want to see sensible partnerships added over time.
It will be great to get new CEO, Sophia Rahmani on the Australian Investors Podcast to gain further insight into the story as it develops.
US markets overnight
Trump signed an executive order to extend the tariff pause with China for a further 90 days and gold imports will not face tariffs.
At home today all eyes will be on the RBA. Everyone is predicting a rate cut when the decision of the RBAs meeting is released at 2:30pm today.
- S&P 500 = -0.25%
- Nasdaq = -0.30%
- Aussie dollar down 0.2% to 65.11 US cents
- Iron up 1.4% to $103.55 US a tonne
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