Magellan scraps $100bn target as CEO hunt begins

Magellan executive chair Andrew Formica has highlighted the skills the firm will be looking for in its recruitment of a new CEO to replace David George, describing his exit as a “necessary change” for the asset manager’s growth.

George left the asset manager with immediate effect in October after just over a year with the business. 

Speaking at the company’s annual general meeting this week, Formica said: “This was a necessary change agreed by David and the board as we start to focus more prominently on our forward growth agenda.”

One of George’s priorities was for the firm to return to $100 billion in assets under management (AUM) in the next five years through a strategy of AUM growth, a diversified product mix and making Magellan partner of choice for wealth managers in Australia. 

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However, in his speech, Formica shied away from giving a specific target number, saying AUM will naturally rise as the business improves its performance. He also stated the firm will be looking beyond customers domestically and positioning for international growth.

“Whilst not necessarily targeting $100 billion in assets under management – AUM really is an outcome of delivering for our clients rather than a strategic goal – the underlying premise of the strategy remains, that is to leverage our strong existing platform across investment, distribution and operations to diversify the business and increase the strong investment talent we have in the business, enabling us to deliver on our commitment to grow the wealth of our clients.”

Key to improving performance will be restoring trust among clients and staff, acknowledging the staff had suffered “continued stress and anxiety” with the company’s turmoil since the departure of founder Hamish Douglass. For customers, the corporate changes have been an “unwanted distraction” which has impacted their portfolios’ performance.

Formica highlighted the qualities that the firm will be seeking in a new chief executive, with a focus on founder-led businesses.

“David and I spoke about the immediate priorities for the business to move forward along its growth plans. Through these conversations, it was clear to us both that the business would be better suited by a new leader whose expected tenure would be aligned to the needs of the business, and had a proven track record in the recruitment of new investment teams, especially through the skill set of negotiating and acquiring founder-led firms.”

Shares in the firm were up 4.7 per cent over the five days to 08 November but are down 20 per cent since the start of the year compared to gains by the ASX 200.

Technology impact

A focus on technology and how it can be used within funds management is also a priority as Formica believes it is lagging behind other industry sectors. Implementing it successfully could lead to streamlined processes, reduced costs and mitigate risks as well as informing the team to make data-driven decisions.

“I am a firm believer that the impact of technology on the funds management industry in the coming years will be profound and those that adapt and evolve with this disruption will thrive. Whilst the financial services sector has seen significant disruption and innovation over the past two decades, the funds management industry has lagged behind other sectors in terms of advancement in technology,” he said.

“The risk is even more acute with the rapid development in the field of artificial intelligence,” he added.

“Magellan has a significant opportunity to embrace its culture of innovation and to take advantage of this changing landscape by providing intelligent solutions for our clients through innovation. The potential applications of this are far-reaching – ranging from enhancing our investment processes, to transforming client interactions, to optimising our own business processes and operations, and even new areas of investment that aren’t even in the design stage currently.”