Magellan continues to bleed funds despite improving performance

Former high-flying fund manager Magellan suffered another $2.1 billion in outflows last month, capping off another tough year for the business as it struggles to regain investors’ confidence.

The latest outflow takes the total decline in Magellan’s funds under management over the last 12 months to $21.6 billion, but analysts the outlook is not all bad, pointing to improvements in its investment performance.

Shares in Magellan tumbled 8.2 per cent to $8.93 a share at the close on Thursday after the firm revealed it had experienced net institutional outflows of $1.7 billion and net retail outflows of $0.4 billion in June.

The group, led by chief executive David George, reported performance fees of about $11 million over the year, but said total funds under management slipped to $39.7 billion from $41.4 billion in May, $61.3 billion in June last year and $115 billion in mid-2021.

It comes after a troubled year in which the company’s share price tumbled due to investment underperformance, and departures from senior management, including high-profile stock picker and founder Hamish Douglass and a former chief executive.

Managing director of activist fund Sandon Capital, Gabriel Radzyminski, who is pushing for Magellan to return capital to shareholders, said the company needed to prioritise regaining investor confidence.

“It just reinforces one of the things we’re advocating they do, which is to focus on the existing business and their existing investors,” Radzyminski said. “They’ve already gone back to basics with their global equities team and gotten performance back up to par, but that has to be the singular priority of the business.”

In the meantime, Radzyminski reiterated his call for Magellan to return capital to shareholders.

“They have huge excess capital on their balance sheet, and we’re arguing that they should use that capital to return to shareholders, not to make acquisitions or anything else to the likes that they’ve alluded to in their strategy,” he said. “Companies have to earn the right and confidence of their shareholders to do things. This company hasn’t yet got that back.”