The fund manager has since announced Douglass will return as a consultant, not an employee.

Former Future Fund deputy chief investment officer David George has been appointed as the new chief executive and the company now says it is working to win back clients’ trust and stem the outflows that have plagued the business for months.

George, who took the helm at Magellan in July, will provide a more detailed update about his vision for the company at the annual general meeting in October.

Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said investors would be looking for George to provide some reassurance that he is the right person to stem the bleeding.

“I think the strategic update is very important to restore some sort of confidence,” she said.

“Right now, we just haven’t really heard about the new strategy, the new team and their vision.”

Liu added it was very difficult to stop such outflows once investors started withdrawing en masse, and said Magellan’s funds under management were likely to continue trending downward.

“Based on the current speed of outflow, it doesn’t seem like it is slowing down,” she said. “So you will always get consensus downgrade further, much lower than what it is today.”

Last month, Morningstar downgraded Magellan, with equity analyst Shaun Ler saying he had underestimated the market disruption to Magellan’s investment style, and said its performance had not materially improved since late 2020.

“We also understated the downside from the dilution of Magellan’s brand, evidenced by mandate losses and outflows. Even if Magellan were to improve its track record, its competitive position is unlikely to be regained,” he said.

Ler said that the new chief executive wants to adapt Magellan to an increasingly competitive landscape, which is positive, but “the road will be challenging”.

“For Magellan to regain new money in an enduring manner, it needs to outperform; continue diversifying portfolio management responsibilities to dilute key person risk; add further differentiated products; reclaim its position in model portfolios; and recover its strong fund ratings and reputation,” he said.

“These milestones will be challenging and – at minimum – will take years to achieve.”

With Angus Thomson

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