Over the last two years Magellan Financial (ASX:MFG) has shifted from market darling to market disaster. The share price hit an all time high above $72 in February 2020. Today it trades below $9, a fall of 88%. Anyone who purchased their shares after May 2013, nearly ten years ago, will be sitting on unrealised losses.
But the past is the past and cannot be undone. The question is, where to from here? If you hold it, should you continue to, or if you don’t hold it should you consider a purchase?
The troubles for Magellan Financial (ASX:MFG) began with some large portfolio positions in Chinese big tech companies. These investments, along with some others, dragged down the performance of the flagship global equities fund. The fund has now underperformed its benchmark over every period up to 10 years.
And then there were the personnel travails. We won’t dwell on it here as it has been well documented, but within a month they lost their CEO and then founder and star fund manager Hamish Douglass.
Magellan was a classic case of a business with very high key person risk. However, when that risk materialised, many shareholders (including myself) were surprised at the severity of the reaction.
Financial services businesses are built on trust. Investors trusted that Douglass was going to deliver the high returns that they had come to expect and when he exited suddenly, their trust was undermined. Funds under management (FUM) declined from $116.4 billion in November 2021 to $50.2 billion a year later, with institutional investors dominating the withdrawals.
They are now in a build back phase. They have a new CEO, David George who has good pedigree, but is unproven in a CEO role. He is focused on the obvious first priority, restoring good performance. All of Magellan’s major strategies have underperformed their benchmarks when measured over the last 12 months, and only the Airlie Australian Shares portfolio has outperformed over a three year period.
Key retail products | FUM (A$b) | Out Performance | Mgt Fee | |
30/11/2022 | 1 yr | 3 yrs | ||
Global Fund - open MGOC | 8.4 | -2.2% | -6.0% | 1.35% |
Unlisted infrastructure | 2.6 | -6.4% | -2.3% | 1.06% |
Airlie Aust share fund AASF | 0.4 | -3.7% | 4.5% | 0.78% |
Source: magellan.com.au as at 23/12/22
Whilst they have generally been…
