Magellan hopeful conservative approach pays off in 2022

Investors will think “thank god we’re with Magellan” this year thanks to its defensive positioning, despite poor performance by the Magellan Global fund in 2021, according to its chief investment officer and chair, Hamish Douglass.

In a December investment update, Douglass said inflation was the biggest factor to watch in 2022.

“I think the big story of 2022 is what happens with inflation in the world,” Douglass said.

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“If the Federal Reserve is forced to stamp out inflation next year, it is hold onto your chairs. The markets are so wound up in crowded trades that if that was to happen, people are in for a rude shock. The great party of 2021 will become the great unwind of 2022 and I put the probability of that [happening] at 30%.

“If that happens in 2022, I think people will say ‘thank god we’re with Magellan’ because half our portfolio is in super defensive assets. It’s the mirror image of us being conservative through 2021.”

At the last meeting in December, the Federal Reserve agreed to speed up the ending of its bond purchasing programme in order to counter rising inflation which had reached 6.8% in December. This compared to inflation of 3% in the September quarter in Australia.

Magellan had been criticised during 2021 for its overly-defensive positioning which led to poor performance during the year. The Magellan Global fund returned 12% over one year to 30 November, 2021, according to its factsheet, versus returns of 26% by the MSCI World index.

Asked would he change anything about the portfolio, Douglass reiterated that he was happy with his current positioning.

“I am not about to start chopping and changing and swinging for the fences just because I’m embarrassed about underperforming the market in a 12-month period. The movie hasn’t ended yet, there is a lot of risk in these markets,” he said.

“People appreciate having a conservative approach here, it’s like we’re the designated driver at a wild party.”


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