“Sheep-like behaviour” by consultants led to the outflows following the exit of Hamish Douglass, according to Magellan, as his return date remains unconfirmed.
In an shareholder update following its half-yearly results to 31 December, 2021, the firm said average funds under management were $112 billion, up 12% from $100.9 billion a year ago.
However, the exit of chairman and chief investment officer Douglass to take a ‘leave of absence’ at the start of February meant they had since fallen to $87 billion, with more than $6 billion lost in less than two weeks.
Chris Mackey, who had temporarily taken over Douglass’ portfolio management duties, told listeners this could be attributed to “sheep-like behaviour” by consultants. He also stated the firm was in detailed conversations with research agencies about Douglass’ funds; Zenith and Lonsec had already downgraded the funds.
“Sometimes clients have clear terms in their mandates which require redemption. When the lead portfolio manager steps away, even if it’s only temporary, that’s triggered some sheep-like behaviour particularly from consultants.
“At this stage, we are ahead of the curve with increased liquidity, we’re in massively liquid companies all around the world and we have taken some early action at the bottom of the portfolio to assist with additional liquidity.
“The engagement [with research agencies] is high but we will leave them to speak for themselves, there have been very detailed conversations.”
However, the firm stopped short of announcing an expected return date for Douglass.
Hamish McLennan, chairman at Magellan, said: “It’s premature to say when he’ll be back, we fully expect that to happen and we want a speedy recovery for him. So when we’re in a position to talk about that with more information, we’ll do that, while accepting it’s a private matter.
“But I want to reiterate Magellan has always had a very big pitch, a lot of our clients may not have seen that because Hamish was such a high-profile front person but we’ve got Nikki [Thomas], Dom Guiliano the guys in the infrastructure team and we have fantastic people here. All the bases are covered from our side.”
The firm was also asked if there were any plans to simplify the flagship Magellan Global fund range which moved to offer an open and closed class in 2020. Three global equity funds were merged into one single trust, the Magellan Global fund, which was over $16 billion between the two classes.
Mackey said: “We prefer simple, we dislike complexity and maybe down the track that’s something to look at but it’s not a priority. If we do any action like that it will be because it’s in the best interest of unitholders in the respective funds”.
