A Sydney investment firm has made $15 million from short-selling shares in troubled fund manager Magellan, after its share price and funds under management have been sent into freefall amid ongoing leadership instability.

Tribeca Investment Partners senior portfolio manager Jun Bei Liu started short-selling Magellan shares, an investment tactic that profits when shares fall in value, in the middle of year when the ASX-listed company was valued at about $50 per share.

Ms Liu’s team, which holds long and short positions on Australian equities, had noticed the relative underperformance in Magellan’s flagship global equities fund and predicted this would lead to lower fees and higher outflows, which would trigger an investor sell-off.

Ms Liu said she had heard rumours of leadership instability within Magellan, but the short position was made on the perspective the company’s stock value was over-priced relative to its earnings.

“We felt the performance is turning, the flows are not that strong, it’s too expensive – any surprises are going to be definitively on the downside,” Ms Liu told The Age and Sydney Morning Herald. “Then when the events started to unfold, then you really gather further evidence that the share price will struggle.”

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Magellan’s share price has fallen to about $14 per share, its lowest point since late 2014, after a series of surprise announcements spooked investors and clients. “It’s quite stark,” Ms Liu said. “We made so much money from that short.”

Ms Liu said it will take years before Magellan can turn things around and predicted the stock had not yet reached its bottom as the company had failed to rebuild trust in the market.

“In funds management, it’s a trust business. If you don’t have that trust, it’s very hard to maintain business momentum,” she said. “They will still have some followers however quite a lot of them have lost faith. Even though outflow is slowing down, it is still a lot of money flying out the door every week.”