Magellan Asset Management has announced the termination of three funds in its Core Series, including a sustainable fund and ESG fund.
In notices issued on 13 November, the asset manager said the board has decided it is in the best interests of unitholders to terminate the Magellan Core Global Fund, the Magellan Core ESG Fund, and the Magellan Sustainable Fund.
The funds were all launched in December 2020. As at 31 October 2024, the Magellan Core Global Fund had the largest amount of assets under management of the three at nearly $28 million, while the Magellan Core ESG fund and Magellan Sustainable Fund held $18.2 million and $9.1 million respectively.
According to Magellan, the decisions follow a review which determined the funds are “unlikely to achieve the necessary scale to operate in the best interests of investors”.
The funds will be officially terminated and removed from quotation on Cboe on 20 November.
Magellan added that the costs of the termination, excluding the transaction costs of realising the funds’ assets, will be paid by Magellan in its personal capacity and will not be borne by the funds.
The move follows a wave of seeming negativity around ESG investing, with a number of sustainable funds relabelling or even shuttering as they struggle to gain flows to sustain operations.
In July, JP Morgan Asset Management (JPMAM) announced it will close its two sustainable infrastructure funds, the JPMorgan Sustainable Infrastructure Fund and JPMorgan Sustainable Infrastructure Active ETF, after the products “failed to gain traction” with the Australian market.
Schroders also announced it is reconsidering its fund range, renaming its Schroders Sustainable Global Core Fund to the Schroder Global Core Fund, removing the fund’s carbon intensity goal and winding back its exclusion to align with Schroders’ exclusion policy on controversial weapons, tobacco production, nuclear weapons and thermal coal mining.
Last month, Money Management explored whether fund managers are abandoning sustainability as product development in the space is trending downwards. There were just 77 launches in the past quarter compared to 325 a year ago.
According to Dugald Higgins, head of sustainable investment at Zenith, managers are coming to the understanding that “the journey is more complicated than they thought”, adding that many hurriedly created solutions which have “turned out not to be fit for purpose”.
“Market evolution works both ways. Many funds are either getting relabelled, restructured or removed altogether. This makes sense as product proliferation often outpaces intelligent design and momentum tends to swing too far ahead and too far behind before reaching a steadier state,” he explained.
