Former Magellan managers Michael Poulsen and Kris Webster have shared their learnings from setting up and running their own boutique fund manager Canopy Investors.
The pair previously worked together at Magellan Financial Group for more than a decade, including four years in the US from 2013 to 2017, before departing in November 2022.
Webster spent 14 years at Magellan until November 2022 in a variety of roles, including head of small and mid-cap and head of global investment. Meanwhile, Poulsen was at the business for over a decade, concluding his time as portfolio manager on the Magellan High Conviction Fund.
They have since set up their own global small and mid-cap (SMID) fund manager, Canopy Investors, with support from Bennelong Funds Management.
This primarily targets retail investors with its Canopy Global Small & Mid Cap Fund, but is also open to institutional investment.
Their experience at Magellan, which was founded in 2006, taught them it could be a complex challenge to set up a fund management firm and prompted the pair to seek help from Bennelong.
Speaking to Money Management, Webster said: “I joined Magellan in 2008 so I saw how the sausage was made, and I saw how hard it is to lift the assets under management in a fund, plus doing the operations, the compliance, the distribution, etc. Magellan started with a $100 million war chest and it was still a rocky road for them.
“We knew early on that we wanted to run our fund and get great returns. We didn’t want to spend our time on paperwork and applications, so we went out and sought a distribution partner who liked what we had to offer.
“Bennelong had an Australian SMID offering in Bennelong Australian Equity Partners,” Poulsen added, “but not a global one, so it made sense. They are very well-regarded and there were fewer affiliates under their umbrella.”
The firm and its Canopy Global Small & Mid Cap Fund was formally launched in June 2024 and it hired an additional portfolio manager in Jack McManus, another Magellan alumni, in July. The fund has 30 holdings and invests in high-quality and attractively priced developed market listed SMID companies, with balanced exposures across a range of sectors and regions.
The pair had been internally running a global SMID fund at Magellan, which wasn’t formally launched to the market, so the pair decided this was an opportunity for their own vehicle when they left. They had also run an internal long-short fund.
Poulsen said: “It became clear the fund wasn’t going to launch at Magellan, and we had to leave it behind when we left. So we evolved it using our own systems at Canopy where we could start from scratch with new resources and new technology.”
“A big part of it so far is investor education. There is a lot of education to do in small and mid-caps around why they should hold it and what it can offer. It’s less-known than you would think. Australian investors might have a global allocation, but not necessarily in small and mid-caps. They can see the argument though as SMID is an attractive hunting ground for active managers,” Webster said.
When it comes to what they have learnt from running an asset manager, the pair said it is crucial to have “love of the game” when it comes to investing. On a practical level, they also agreed a distribution partner had been a solid decision to make.
Poulsen said: “Find a distribution partner. You don’t have to do this as it can be done independently, but we found this was the right choice for us.
“Decide on what is your point of differentiation – what do you add for clients? Fund management is so competitive, but we felt global small and mid-cap was a differentiator and an area where we could offer real value.”
“Build a team you work well with and who have worked together in the past, who you trust and can share experience with. It does add an extra layer of complexity to do it without a team or without a team you know well,” Webster added.
Looking into 2025, the pair said they want to generate great returns from their fund and find great investments for the next three to five years, as well as generate brand awareness.
